… and then listening to it

by Henry on May 23, 2005

Steven Levitt’s work, as summarized in Freakonomics and the original articles on which Freakonomics draws, is eclectic in both subject matter and methodology. In the best sense of the word, it’s problem-driven research. Levitt has an extraordinary knack for finding interesting problems and interesting data that can be brought to bear on those problems. This is a large part of its attraction to the broader social science community – when you read something that Levitt has written or collaborated on, you get the sense of someone who is genuinely excited at discovering more about the ways in which the world works. His work is driven by curiosity, and it shows. As Kingsley Amis’s Jim Dixon says, an awful lot of academic work consists of “funereal parade[s] of yawn-enforcing facts,” that throw “pseudo-light” on “non-problems.” Not Levitt’s articles. Insofar as thirty-page chunks of social science can be fun, they’re fun.

Perhaps surprisingly, this doesn’t necessarily make for a great book. Eclecticism works best in measured individual doses, and if Freakonomics has a flaw, it’s that it has no clear organizing theme. As Kieran notes in his post, the only common thread in the book is the rather vague idea of ‘incentives,’ and the nature of the incentives changes from chapter to chapter along with the motivations of the actors involved. Some of Levitt’s best known work (viz. his arguments about the effects of abortion on crime rates in later generations) doesn’t even involve incentives at all. This means that the book sometimes feels a little breathless as it jumps from theme to theme (if this is page 90, it must be drug dealers), or lumps together two very different sets of arguments (risks from guns and swimming pools on the one hand, and the effect of parenting on the other) into a single chapter, because they both have to do with families. While I’d happily recommend the book to people who haven’t encountered Levitt’s work, or who are just interested in smart ideas that connect to everyday life, I’d strongly urge them to read it a chapter at a time. Too many rich ideas can lead to dizziness and intellectual indigestion if they’re gulped down at one sitting.

But even if this makes for a slightly episodic book, it makes for a highly attractive model of research. There’s an interesting contrast to be drawn between Levitt’s eclecticism, and the agenda that was drawn out some nearly three decades ago by his friend and University of Chicago colleague, Gary Becker in The Economic Approach to Human Behavior. Now, I’m using Becker’s work here, not exactly as a straw man, but as a prominent examplar of a particular approach to economics. I suspect that even Gary Becker isn’t Gary Becker in the sense that he was twenty-nine years ago – but the claims that he put forward then still resonate in the profession.

Becker, like Levitt, is heartily in favor of eclecticism, but an eclecticism that is subordinated to a preset intellectual agenda. He advocates the position that “the economic approach provides a valuable unified framework for understanding all human behaviour,” (emphasis in original) because “all human behavior can be viewed as involving participants who maximize their utility from a stable set of preferences and accumulate an optimal amount of information and other inputs in a variety of markets.” As Tyler might say, there are markets in everything (even if they’re sometimes shadow markets). While Becker recognizes that non-economic variables can affect human behaviour, his very clear preference is for concentrating on the “economic approach,” which, as he defines it, consists of three key assumptions – maximizing behaviour, fixed preferences and market equilibrium. In Becker’s contention, these provide the key to understanding a wide variety of human behaviour, not only in the economic realm, but in the family and society too. Becker’s approach is often characterized as economic imperialism, and there’s a whiff of colonialism in his conception of the relationship between economics and the other social sciences (economics would provide the framework within which the contributions of the other social sciences should be integrated). None of which is to say that there isn’t clear intellectual value to pushing the basic ideas of economics as far as they can go (and perhaps a little further) as Becker proposes.

However, this is not (as best as I can make out), what Levitt is offering us. There’s a superficial resemblance – Becker, like Levitt, tackles an enormous variety of topics – racial discrimination, fertility, crime, education and so on. But Becker is trying to apply a single unified theoretical framework to all of these disparate topics. In short, he’s arguing that their differences are superficial, and that they’re fundamentally structured by a coherent and unified logic. Now, Andrew Samwick argues (update: see also “Samwick’s response:http://voxbaby.blogspot.com/2005/05/freakonomics-on-crooked-timber.html ) that Levitt represents a continuation of this tradition (for Samwick, Levitt is a sort of Becker on steroids).

Steve is the next generation of the “Chicago School” of economics, in which the basic price theory of economics is inserted into every social environment imaginable. The original generation—Friedman, Becker, and Stigler—focused on what are by now traditional areas like education, the family, and the law. But I’d wager that even the founders of the School would have to admit that Steve’s ability to see the economics in unusual situations is without equal, past or present. The next generation also comes armed with modern computing power and thus a much greater ability to analyze data in support of their claims. … What does it mean to “see the economics” in a given situation? Economics consists of exactly two ideas: optimization and equilibrium.

Now this is an interesting characterization of Levitt, and as Samwick argues, Levitt is clearly influenced by the earlier generation of the Chicago school. Still, Samwick is wrong in some very important ways. Levitt, unlike Friedman or Becker, seems to be primarily driven by the specific research question and by the data rather than by the desire to see everything through the lens of economics. When the question and the data point in the direction of interactions that can be modeled using optimization and equilibria, this is where Levitt goes. Thus, his work on cheating among Sumo wrestlers, and (my personal favourite, which isn’t mentioned in Freakonomics) on mixed strategies in football penalty kicks. However, much of Levitt’s work on other topics, including what is perhaps his most widely read article (the piece on abortion and crime rates in future generations) appears to have nothing to do with the economic approach, in either Becker’s formulation or Samwick’s slightly pared-down version of same. Neither equilibria nor optimization come into his story. One can go further – Levitt’s work on choice over names for babies supports a set of assertions that go against the economic model as Becker and Samwick describe it. Levitt makes it quite clear that there is no equilibrium in baby names. “Low end people,” in Levitt’s terminology, want to adopt the names of high end people; they want to adopt names that sound ‘successful.’ But as soon as “a high-end name is adopted en masse, high-end parents begin to abandon it. Eventually, it is considered so common that even lower-end parents may not want it, whereby it falls out of the rotation entirely. The lower-end parents, meanwhile, go looking for the next name that the upper-end parents have broken in.” As both Becker and Samwick’s definitions imply, economics is about the quest for equilibria; equilibria are what give economic models their bite, their predictive power. So when Levitt starts analyzing the non-equilibriating processes in baby-names, he’s really not being an economist in the sense that Becker and Samwick define ‘being an economist.’ One might better say that he’s being a sociologist, in a well established tradition of sociology (in addition to the names that Kieran mentions, Levitt’s findings are strongly reminiscent of Pierre Bourdieu’s work on processes of social distinction).

Not so much economic imperialism perhaps, as the empire striking back. What’s hopeful about Levitt’s work for a non-economist like me (who likes economists, who likes working with economists, but who finds a lot of economics curiously disconnected from the real world processes that it claims to model) is what it suggests for the future. Perhaps, as smart economists really begin to gaze into the empirical data, the empirical data is gazing back into them. There’s still a lot to be learned from the broad ranging application of Becker’s economic approach to human behavior. It produces striking insights in places where one might expect it to provide no insights at all. But it’s not the only game in town. A more problem driven and theoretically eclectic approach to economics, of the sort that Levitt seems to be pushing, has a lot to offer in its own right. Furthermore, if it’s done properly it has the potential to create real conversations across the social sciences, where now there’s only mutual incomprehension.

{ 7 comments }

1

Vance Maverick 05.23.05 at 3:15 pm

You need to mark that block quote in some way….

2

Henry 05.23.05 at 4:32 pm

Thanks! sorted.

3

Sebastian Holsclaw 05.23.05 at 7:16 pm

Isn’t the name issue closer to a strange attractor style of equilibria than the standard model of equilibria?

4

Andrew Samwick 05.23.05 at 9:35 pm

Thank you, Henry, for a very perceptive critique of my post on Freakonomics. I follow up in a new post.

5

Henry 05.24.05 at 9:20 am

Sebastian, as your comment implies, the word equilibrium is a little vague (and indeed within economics itself covers a family of related concepts/refinements). It’s been years since I read any chaos theory popularizations (and that’s about as far as I ever got with chaos theory), but from my distant memory, I’m not sure if there’s even that kind of equilibriating going on here. Which is to say that as soon as one solution (baby names) becomes attractive enough to the less well off, it _ipso facto_ becomes less attractive to the more well off, and you get another (equally temporary) process of reconvergence on another name. I’m not sure if there are any good mathematical models of this kind of process – but as noted, am not an expert.

Andrew – will include a link to your post.

6

Conchis 05.24.05 at 11:16 am

While I agree that “when Levitt starts analyzing the non-equilibriating processes in baby-names, he’s really not being an economist in the sense that Becker and Samwick define ‘being an economist”, I would argue that the problem is with Becker’s and Samwick’s characterisation of economics as concerned only with equilibirum. (Indeed, Andrew has already taken some heat for his rather restrictive definition of economics in comments on his blog.)

Economics, particularly the bits that deal a lot in game theory, would have no particular problem with cyclic, non-equilibrium behaviour that the baby naming case seems to exhibit, provided that it still conforms to a particular type of explanation as to why there’s no equilibrium: the structure of preferences and incentives don’t allow it. Without having read Levitt’s actual work on this myself, it seems that that’s exactly the sort of explanation that’s going on here. (Correct me if I’m wrong.)

The point that Levitt’s more than just Becker on steroids is well taken. But I think it’s also important to stress that Becker’s (30-year old) say so doesn’t mean that what he’s doing is outside the scope of what most economists are comfortable with these days.

7

seth edenbaum 05.25.05 at 10:22 pm

When I get into the subway in the morning I walk into a crowd, often bunched near the doorways, leaving space in the middle of the train. A scientific study of group behavior might be used to develop train designs that limit this behavior, but it would also help if people were taught to be more observant and aware of each other. Science, or rather the Chicago school of socioeconomic behavioral studies- is that good enough?- reduces everyone to the level of mass idiocy, in the name of democracy and freedom. What is created by this however, is a sort of hard superiority of the rational mind. I much prefer the soft superiority of the sympathetic imagination, the sort of mind that is aware of the others in the room. I prefer human to technical knowledge

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