Freakonomics [Revised and Expanded]: A Rogue Economist Explores the Hidden Side of Everything

I gave it as a gifr for my son majoring in economice... He said "WOW.. I always wanted this book !"

Just to respond to a review that was extremely critical of this book - Economics is just that STATISTICS WITH A THEORY.

If you took any undergraduate economic classes you'd understand that economics is the formation of theories to explain trends that are portrayed in data. No matter how absurd the theory - with proper support (which Leavitt documents repeatedly) there is absolutely no reason to review this book negatively.

The only kind of person who would review this negatively is someone who is looking for concrete answers in a world where nothing is concrete. This is social science and as a result there are no end all statements - instead there are crafy theories which do extremely well to explain trends in data.

All in all this book was a blast to read!

Computers, not abortion are the reason for the drop in crime in the 90's.
Think about it.

Even if his research interests are cheating, corruption, and crime, Steven D. Levitt - MIT PhD, John Bates Clark Medal winner and father of four - makes a poor rogue. And it is sometimes hard to tell if he is an economist, statistician or sociologist. Other than those minor points, the title is fairly accurate.

Levitt is best known for his controversial argument that legalized abortion was largely responsible for the unexpected drop in US crime rates during the 1990s. But the book covers many other topics. Suspicious patterns of right and wrong answers on multiple choice tests are used to catch cheating (by teachers!). Consistent wins against the odds in crucial sumo bouts put the finger on colluding wrestlers. Real estate agents keep their own homes on the market longer, and sell them for higher prices, than they do with clients' homes. And a retired economist and college educated gang leader happen to keep unusually good records of their respective bagel and crack cocaine businesses.

Like Seinfeld, Freakonomics claims not to be about anything. This disclaimer, however, is somewhat undermined by the list of themes (conveniently highlighted in italics) in the introduction. Themes, moreover, stunning in their banality and vacuity. "Incentives are the cornerstone of modern life . . . The conventional wisdom is often wrong . . . Dramatic effects often have distant, even subtle, causes . . . Experts use their informational advantages to serve their own agenda . . . Knowing what to measure and how to measure it makes a complicated world much less so . . . morality represents the way we would like the world to work, and economics represents the way it does work."

The authors liked the last line so much they could not resist repeating it throughout the book, even when what they are writing shows the exact opposite. Economic incentives can backfire if they weaken social and moral incentives - imposing a small fine on tardy parents at a day-care centre or paying donors for blood. And their explantion of incentives is gruesomely bad:

"If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight A's from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder." (Followed by three more pairs of totally unrelated opposites.)

Freakonomics is full of interesting stories, even if each finding could be (and has been) questioned individually. (After all, is there anything interesting in the social sciences that has not attracted criticism?) If anecdotes are all you want, the book is great. If you want anything more . . .

Originally published in the Economic Record, March 2006.

This is the most fascinating book I have read this year. I could not resist sending copies to my friends and relatives