Freakonomics

Kenneth Silber reviews the book, Freakonomicc by Steven Levitt, an economist at the University of Chicago. Looks like a very interesting book.

The philosopher Isaiah Berlin once divided intellectuals into two categories, based on a fragment from the ancient Greek poet Archilochus: "The fox knows many things, but the hedgehog knows one big thing." Thus, hedgehogs produce work that reflects a single vision or principle, while foxes explore a scattered array of ideas. In Berlin's telling, Plato, Dante, and Proust were hedgehogs; Aristotle, Shakespeare, and Joyce were foxes.

[BTW, Jim Collins uses a similar approach to understand the leaders in successful companies and leaders in would be successful companies in Buil-to-last. The HedgeHog wins!]

The book, which grew out of a 2003 profile of Levitt by Dubner in the New York Times Magazine, is organized around an eccentric set of questions. One chapter, for instance, is titled "How is the Ku Klux Klan Like a Group of Real-Estate Agents?" The answer is that both groups depend on closely held information. Agents hoard data on market trends, inventories and leads. Klansmen obscure their identities and activities. The Internet has eroded real-estate professionals' information edge. The Klan was thrown into turmoil decades ago by an informant who revealed passwords and other secrets to producers of a Superman radio show, such that kids were soon engaged in mock Klan-busting.

Levitt sparked intense controversy several years ago with a study suggesting that legalized abortion in the 1970s was a major factor in the decline of crime in the 1990s -- since abortions prevented many births that would have resulted in children growing up at high risk of becoming criminals. He maintains this position in Freakonomics, arguing that statistical analysis shows Roe v. Wade led to safer cities. (He acknowledges, though, that this does not settle moral arguments over abortion.)

A chapter titled "Why Do Drug Dealers Still Live with Their Moms?" provides an analysis of the economic workings of a Chicago crack gang, based on data collected (initially at high personal risk) by a young sociologist named Sudhir Venkatesh. The upshot is that the crack trade, even at its market peak, was lucrative only for those at the top of a selling organization. The gang's foot soldiers made less than minimum wage and faced a 1-in-4 risk of being killed over four years. (In the same time, being a timber cutter, the most dangerous legitimate job in the U.S., carried a 1-in-200 risk.) These drug dealers struggled desperately to reach the gang's upper echelons, but few would make it.

Steven and Stephen (the co-author) also maintains a blog with the same name, which made it to the Blogger "Blog of Note" list. (I guess my readers are coming to this blog from the same list. Feels great to be part of the same list as Freakonomics, unfortunately Blogger (or Google) has been highly lenient in selecting my blog)