|Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
by celebrated University of Chicago economist Steven D. Levitt and ace journalist Stephen J. Dubner
Anyone living in the United States in the early 1990s and paying even a whisper of attention to the nightly news or a daily paper could be forgiven for having been scared out of his skin.
The culprit was crime. It had been rising relentlessly-a graph plotting the crime rate in any American city over recent decades looked like a ski slope in profile-and it seemed now to herald the end of the world as we knew it. Death by gunfire, intentional and otherwise, had become commonplace. So too had carjacking and crack dealing, robbery and rape. Violent crime was a gruesome, constant companion. And things were about to get even worse. Much worse. All the experts were saying so.
The cause was the so-called superpredator. For a time, he was everywhere. Glowering from the cover of newsweeklies. Swaggering his way through foot-thick government reports. He was a scrawny, big-city teenager with a cheap gun in his hand and nothing in his heart but ruthlessness. There were thousands out there just like him, we were told, a generation of killers about to hurl the country into deepest chaos.
In 1995 the criminologist James Alan Fox wrote a report for the U.S. attorney general that grimly detailed the coming spike in murders by teenagers. Fox proposed optimistic and pessimistic scenarios. In the optimistic scenario, he believed, the rate of teen homicides would rise another 15 percent over the next decade; in the pessimistic scenario, it would more than double. "The next crime wave will get so bad," he said, "that it will make 1995 look like the good old days."
Other criminologists, political scientists, and similarly learned forecasters laid out the same horrible future, as did President Clinton. "We know we've got about six years to turn this juvenile crime thing around," Clinton said, "or our country is going to be living with chaos. And my successors will not be giving speeches about the wonderful opportunities of the global economy; they'll be trying to keep body and soul together for people on the streets of these cities." The smart money was plainly on the criminals.
And then, instead of going up and up and up, crime began to fall. And fall and fall and fall some more. The crime drop was startling in several respects. It was ubiquitous, with every category of crime falling in every part of the country. It was persistent, with incremental decreases year after year. And it was entirely unanticipated-especially by the very experts who had been predicting the opposite.
The magnitude of the reversal was astounding. The teenage murder rate, instead of rising 100 percent or even 15 percent as James Alan Fox had warned, fell more than 50 percent within five years. By 2000 the overall murder rate in the United States had dropped to its lowest level in thirty-five years. So had the rate of just about every other sort of crime, from assault to car theft.
Even though the experts had failed to anticipate the crime drop- which was in fact well under way even as they made their horrifying predictions-they now hurried to explain it. Most of their theories sounded perfectly logical. It was the roaring 1990s economy, they said, that helped turn back crime. It was the proliferation of gun control laws, they said. It was the sort of innovative policing strategies put into place in New York City, where murders would fall from 2,245 in 1990 to 596 in 2003.
These theories were not only logical; they were also encouraging, for they attributed the crime drop to specific and recent human initiatives. If it was gun control and clever police strategies and betterpaying jobs that quelled crime-well then, the power to stop criminals had been within our reach all along. As it would be the next time, God forbid, that crime got so bad.
These theories made their way, seemingly without question, from the experts' mouths to journalists' ears to the public's mind. In short course, they became conventional wisdom.
There was only one problem: they weren't true.
Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?
For every clever person who goes to the trouble of creating an in- centive scheme, there is an army of people, clever and otherwise, who will inevitably spend even more time trying to beat it. Cheating may or may not be human nature, but it is certainly a prominent feature in just about every human endeavor. Cheating is a primordial economic act: getting more for less. So it isn't just the boldface names-inside-trading CEOs and pill-popping ballplayers and perk-abusing politicians-who cheat. It is the waitress who pockets her tips instead of pooling them. It is the Wal-Mart payroll manager who goes into the computer and shaves his employees' hours to make his own performance look better. It is the third grader who, worried about not making it to the fourth grade, copies test answers from the kid sitting next to him.
Some cheating leaves barely a shadow of evidence. In other cases, the evidence is massive. Consider what happened one spring evening at midnight in 1987: seven million American children suddenly disappeared. The worst kidnapping wave in history? Hardly. It was the night of April 15, and the Internal Revenue Service had just changed a rule. Instead of merely listing each dependent child, tax filers were now required to provide a Social Security number for each child. Suddenly, seven million children-children who had existed only as phantom exemptions on the previous year's 1040 forms-vanished, representing about one in ten of all dependent children in the United States.
The incentive for those cheating taxpayers was quite clear. The same for the waitress, the payroll manager, and the third grader. But what about that third grader's teacher? Might she have an incentive to cheat? And if so, how would she do it?
Could any man resist the temptation of evil if he knew his acts could not be witnessed?
Story about a toll-collector strike in England. During the strike, drivers were asked simply to put their money into a box. As it turned out, the government collected more toll money during the strike -- which suggests that the drivers were at least fairly honest, but also that the toll collectors had been skimming like mad.
Chapter 2: How Is the Ku Klux Klan Like a Group of Real-Estate Agents?
A big part of a real-estate agent's job, it would seem, is to persuade the homeowner to sell for less than he would like while at the same time letting potential buyers know that a house can be bought for less than its listing price. To be sure, there are more subtle means of doing so than coming right out and telling the buyer to bid low. The study of real-estate agents cited earlier also includes data that reveals how agents convey information through the for-sale ads they write. A phrase like "well maintained," for instance, is as full of meaning to an agent as the code phrase "Mr. Ayak" was to a member of the Ku Klux Klan; it means that a house is old but not quite falling down. A savvy buyer will know this (or find out for himself once he sees the house), but to the sixty-five-year-old retiree who is selling his house, "well maintained" might sound like a compliment, which is just what the agent intends.
An analysis of the language used in real-estate ads shows that certain words are powerfully correlated with the final sale price of a house. This doesn't necessarily mean that labeling a house "well maintained" causes it to sell for less than an equivalent house. It does, however, indicate that when a real-estate agent labels a house "well maintained," she is subtly encouraging a buyer to bid low.
Listed below are ten terms commonly used in real-estate ads. Five of them have a strong positive correlation to the ultimate sales price, and five have a strong negative correlation. Guess which are which.
Ten Common Real-Estate Ad Terms
A "fantastic" house is surely fantastic enough to warrant a high price, isn't? What about a "charming" and "spacious" house in a "great neighborhood!"? No, no, no, and no. Here's the breakdown:
Five Terms Correlated to a Higher Sales Price
Five Terms Correlated to a Lower Sales Price
Three of the five terms correlated with a higher sales price are physical descriptions of the house itself: granite, Corian, and maple. As information goes, such terms are specific and straightforward-and therefore pretty useful. If you like granite, you might like the house; but even if you don't, "granite" certainly doesn't connote a fixer-upper. Nor does "gourmet" or "state-of-the-art," both of which seem to tell a buyer that a house is, on some level, truly fantastic.
"Fantastic," meanwhile, is a dangerously ambiguous adjective, as is "charming." Both these words seem to be real-estate agent code for a house that doesn't have many specific attributes worth describing. "Spacious" homes, meanwhile, are often decrepit or impractical. "Great neighborhood" signals a buyer that, well, this house isn't very nice but others nearby may be. And an exclamation point in a realestate ad is bad news for sure, a bid to paper over real shortcomings with false enthusiasm.
If you study the words in the ad for a real-estate agent's own home, meanwhile, you see that she indeed emphasizes descriptive terms (especially "new," "granite," "maple," and "move-in condition") and avoids empty adjectives (including "wonderful," "immaculate," and the telltale "!"). Then she patiently waits for the best buyer to come along. She might tell this buyer about a house nearby that just sold for $25,000 above the asking price, or another house that is currently the subject of a bidding war. She is careful to exercise every advantage of the information asymmetry she enjoys.
You shouldn't rely upon the real estate salesperson you hire to sell your home for the best price. Realtors make more money by churning through sales quickly, so they consistently underprice their clients' homes and badger their clients into selling too early.
Levitt studied 100,000 home sales in Chicago and found that when selling their own homes, real estate agents held out on average for ten days more than their clients did and, all else being equal in terms of the quality of the house, got over three percent more for it, or $10,000 on a $300,000 home.
This is a useful but not terribly astounding finding. Indeed, the only thing remarkable about his realtor research is that, apparently, no economist ever published a study of this obvious phenomenon before Levitt.
Chapter 3: Why Do Drug Dealers Still Live with Their Moms?
In other words, a crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage. Notwithstanding the leadership's rhetoric about the family nature of the business, the gang's wages are about as skewed as wages in corporate America. A foot soldier had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker. In fact, most of J. T.'s foot soldiers also held minimum-wage jobs in the legitimate sector to supplement their skimpy illicit earnings. The leader of another crack gang once told Venkatesh that he could easily afford to pay his foot soldiers more, but it wouldn't be prudent. "You got all these niggers below you who want your job, you dig?" he said. "So, you know, you try to take care of them, but you know, you also have to show them you the boss. You always have to get yours first, or else you really ain't no leader. If you start taking losses, they see you as weak and shit."
Along with the bad pay, the foot soldiers faced terrible job conditions. For starters, they had to stand on a street corner all day and do business with crackheads. (The gang members were strongly advised against using the product themselves, advice that was enforced by beatings if necessary.) Foot soldiers also risked arrest and, more worri- some, violence. Using the gang's financial documents and the rest of Venkatesh's research, it is possible to construct an adverse-events index of J. T.'s gang during the four years in question. The results are astonishingly bleak. If you were a member of J. T.'s gang for all four years, here is the typical fate you would have faced during that period:
Number of times arrested 5.9
Number of nonfatal wounds or injuries 2.4 (not including injuries meted out by the gang itself for rules violations)
Chance of being killed 1 in 4
A 1-in-4 chance of being killed! Compare these odds to being a timber cutter, which the Bureau of Labor Statistics calls the most dangerous job in the United States. Over four years' time, a timber cutter would stand only a 1-in-200 chance of being killed. Or compare the crack dealer's odds to those of a death row inmate in Texas, which executes more prisoners than any other state. In 2003, Texas put to death twenty-four inmates-or just 5 percent of the nearly 500 inmates on its death row during that time. Which means that you stand a greater chance of dying while dealing crack in a Chicago housing project than you do while sitting on death row in Texas. So if crack dealing is the most dangerous job in America, and if the salary is only $3.30 an hour, why on earth would anyone take such a job?
Other Levitt theories span the landscape. Along with sociologist Sudhir Venkatesh of Columbia University, Levitt has found that drug gangs are structured essentially like street versions of Fortune 500 corporations. Levitt studied high-tech car alarm devices and found they benefited the people who did not buy them almost as much as those who did, by discouraging all auto theft.
Chapter 4: Where Have All the Criminals Gone?
Perhaps the most dramatic effect of legalized abortion, and one that would take years to reveal itself, was its impact on crime.
In the early 1990s, just as the first cohort of children born after Roe v. Wade was hitting its late teen years-the years during which young men enter their criminal prime-the rate of crime began to fall. What this cohort was missing, of course, were the children who stood the greatest chance of becoming criminals. And the crime rate continued to fall as an entire generation came of age minus the children whose mothers had not wanted to bring a child into the world. Legalized abortion led to less unwantedness; unwantedness leads to high crime; legalized abortion, therefore, led to less crime.
This theory is bound to provoke a variety of reactions, ranging from disbelief to revulsion, and a variety of objections, ranging from the quotidian to the moral. The likeliest first objection is the most straightforward one: is the theory true? Perhaps abortion and crime are merely correlated and not causal.
It may be more comforting to believe what the newspapers say, that the drop in crime was due to brilliant policing and clever gun control and a surging economy. We have evolved with a tendency to link causality to things we can touch or feel, not to some distant or difficult phenomenon. We believe especially in near-term causes: a snake bites your friend, he screams with pain, and he dies. The snakebite, you conclude, must have killed him. Most of the time, such a reckoning is correct. But when it comes to cause and effect, there is often a trap in such open-and-shut thinking. We smirk now when we think of ancient cultures that embraced faulty causes-the warriors who believed, for instance, that it was their raping of a virgin that brought them victory on the battlefield. But we too embrace faulty causes, usually at the urging of an expert proclaiming a truth in which he has a vested interest.
How, then, can we tell if the abortion-crime link is a case of causality rather than simply correlation?
One way to test the effect of abortion on crime would be to measure crime data in the five states where abortion was made legal before the Supreme Court extended abortion rights to the rest of the country.
In New York, California, Washington, Alaska, and Hawaii, a woman had been able to obtain a legal abortion for at least two years before Roe v. Wade. And indeed, those early-legalizing states saw crime begin to fall earlier than the other forty-five states and the District of Columbia. Between 1988 and 1994, violent crime in the earlylegalizing states fell 13 percent compared to the other states; between 1994 and 1997, their murder rates fell 23 percent more than those of the other states.
But what if those early legalizers simply got lucky? What else might we look for in the data to establish an abortion-crime link? One factor to look for would be a correlation between each state's abortion rate and its crime rate. Sure enough, the states with the highest abortion rates in the 1970s experienced the greatest crime drops in the 1990s, while states with low abortion rates experienced smaller crime drops. (This correlation exists even when controlling for a variety of factors that influence crime: a state's level of incarceration, number of police, and its economic situation.) Since 1985, states with high abortion rates have experienced a roughly 30 percent drop in crime relative to low-abortion states. (New York City had high abortion rates and lay within an early-legalizing state, a pair of facts that further dampen the claim that innovative policing caused the crime drop.) Moreover, there was no link between a given state's abortion rate and its crime rate before the late 1980s-when the first cohort affected by legalized abortion was reaching its criminal prime-which is yet another indication that Roe v. Wade was indeed the event that tipped the crime scale.
There are even more correlations, positive and negative, that shore up the abortion-crime link.
Chapter 5: What Makes a Perfect Parent?
No one is more susceptible to an expert's fearmongering than a parent. Fear is in fact a major component of the act of parenting. A parent, after all, is the steward of another creature's life, a creature who in the beginning is more helpless than the newborn of nearly any other species. This leads a lot of parents to spend a lot of their parenting energy simply being scared.
The problem is that they are often scared of the wrong things. It's not their fault, really. Separating facts from rumors is always hard work, especially for a busy parent. And the white noise generated by the experts-to say nothing of the pressure exerted by fellow parents- is so overwhelming that they can barely think for themselves. The facts they do manage to glean have usually been varnished or exaggerated or otherwise taken out of context to serve an agenda that isn't their own.
Consider the parents of an eight-year-old girl named, say, Molly. Her two best friends, Amy and Imani, each live nearby. Molly's parents know that Amy's parents keep a gun in their house, so they have forbidden Molly to play there. Instead, Molly spends a lot of time at Imani's house, which has a swimming pool in the backyard. Molly's parents feel good about having made such a smart choice to protect their daughter.
But according to the data, their choice isn't smart at all. In a given year, there is one drowning of a child for every 11,000 residential pools in the United States. (In a country with 6 million pools, this means that roughly 550 children under the age of ten drown each year.) Meanwhile, there is 1 child killed by a gun for every 1 millionplus guns. (In a country with an estimated 200 million guns, this means that roughly 175 children under ten die each year from guns.) The likelihood of death by pool (1 in 11,000) versus death by gun (1 in 1 million-plus) isn't even close: Molly is roughly 100 times more likely to die in a swimming accident at Imani's house than in gunplay at Amy's.
Chapter 6: Perfect Parenting, or: Would a Roshanda by Any Other Name Smell as Sweet?
Then there is the recent case of Temptress, a fifteen-year-old girl whose misdeeds landed her in Albany County Family Court in New York. The judge, W. Dennis Duggan, had long taken note of the strange names borne by some offenders. One teenage boy, Amcher, had been named for the first thing his parents saw upon reaching the hospital: the sign for Albany Medical Center Hospital Emergency Room. But Duggan considered Temptress the most outrageous name he had come across.
"I sent her out of the courtroom so I could talk to her mother about why she named her daughter Temptress," the judge later recalled. "She said she was watching The Cosby Show and liked the young actress. I told her the actress's name was actually Tempestt Bledsoe. She said she found that out later, that they had misspelled the name. I asked her if she knew what 'temptress' meant, and she said she also found that out at some later point. Her daughter was charged with ungovernable behavior, which included bringing men into the home while the mother was at work. I asked the mother if she had ever thought the daughter was living out her name. Most all of this went completely over her head."
Was Temptress actually "living out her name," as Judge Duggan saw it? Or would she have wound up in trouble even if her mother had called her Chastity?
It isn't much of a stretch to assume that Temptress didn't have ideal parents. Not only was her mother willing to name her Temptress in the first place, but she wasn't smart enough to know what that word even meant. Nor is it so surprising, on some level, that a boy named Amcher would end up in family court. People who can't be bothered to come up with a name for their child aren't likely to be the best parents either.
So does the name you give your child affect his life? Or is it your life reflected in his name? In either case, what kind of signal does a child's name send to the world-and most important, does it really matter?
Fryer's work on ''acting white,'' explored the rift between black and white cultures, asking in particular whether black parents who give their children a name like DeShawn or Imani hinder their children's career prospects.
Many parents seem to think that a child will not prosper unless it is hitched to the right one; names are seen to carry great aesthetic and even predictive powers.
This might explain why, in 1958, a New York City father named Robert Lane decided to call his baby son Winner. The Lanes, who lived in a housing project in Harlem, already had several children, each with a fairly typical name. But this boy—well, Robert Lane apparently had a special feeling about him. Winner Lane: How could he fail with a name like that?
Three years later, the Lanes had another baby boy, their seventh and last child. For reasons that no one can quite pin down today, Robert decided to name this boy Loser. Robert wasn't unhappy about the new baby; he just seemed to get a kick out of the name's bookend effect. First a Winner, now a Loser. But if Winner Lane could hardly be expected to fail, could Loser Lane possibly succeed?
Loser Lane did in fact succeed. He went to prep school on a scholarship, graduated from Lafayette College in Pennsylvania, and joined the New York Police Department, where he made detective and, eventually, sergeant. Although he never hid his name, many people were uncomfortable using it. To his police colleagues today, he is known as Lou.
And what of his brother? The most noteworthy achievement of Winner Lane, now in his late 40s, is the sheer length of his criminal record: more than 30 arrests for burglary, domestic violence, trespassing, resisting arrest, and other mayhem.
These days, Loser and Winner barely speak. The father who named them is no longer alive. Though he got his boys mixed up, did he have the right idea—is naming destiny? What kind of signal does a child's name send to the world?
These are the sort of questions that led to "The Causes and Consequences of Distinctively Black Names," a research paper written by a white economist (Steven Levitt, a co-author of this article) and a black economist (Roland G. Fryer Jr., a young Harvard scholar who studies race). The paper acknowledged the social and economic gulf between blacks and whites but paid particular attention to the gulf between black and white culture. Blacks and whites watch different TV shows, for instance; they smoke different cigarettes. And black parents give their children names that are starkly different than white children's.
The names research was based on an extremely large and rich data set: birth-certificate information for every child born in California since 1961. The data covered more than 16 million births. It included standard items like name, gender, race, birthweight, and the parents' marital status, as well as more telling factors: the parents' ZIP code (which indicates socioeconomic status and a neighborhood's racial composition), their means of paying the hospital bill for the birth (again, an economic indicator), and their level of education.
The California data establish just how dissimilarly black and white parents have named their children over the past 25 years or so—a remnant, it seems, of the Black Power movement. The typical baby girl born in a black neighborhood in 1970 was given a name that was twice as common among blacks than whites. By 1980, she received a name that was 20 times more common among blacks. (Boys' names moved in the same direction but less aggressively—likely because parents of all races are less adventurous with boys' names than girls'.) Today, more than 40 percent of the black girls born in California in a given year receive a name that not one of the roughly 100,000 baby white girls received that year. Even more remarkably, nearly 30 percent of the black girls are given a name that is unique among every baby, white and black, born that year in California. (There were also 228 babies named Unique during the 1990s alone, and one each of Uneek, Uneque, and Uneqqee; virtually all of them were black.)
What kind of parent is most likely to give a child such a distinctively black name? The data offer a clear answer: an unmarried, low-income, undereducated, teenage mother from a black neighborhood who has a distinctively black name herself. Giving a child a super-black name would seem to be a black parent's signal of solidarity with her community—the flip side of the "acting white" phenomenon. White parents, meanwhile, often send as strong a signal in the opposite direction. More than 40 percent of the white babies are given names that are at least four times more common among whites.
So, what are the "whitest" names and the "blackest" names? Click here for the top 20 each for girls and here for the top 20 each for boys. (For the curious, we've also put together a list of the top 20 crossover names—the ones that blacks and whites are most likely to share.) And how much does your name really matter? Over the years, a series of studies have tried to measure how people perceive different names. Typically, a researcher would send two identical (and fake) résumés, one with a traditionally white name and the other with an immigrant or minority-sounding name, to potential employers. The "white" résumés have always gleaned more job interviews. Such studies are tantalizing but severely limited, since they offer no real-world follow-up or analysis beyond the résumé stunt.
The California names data, however, afford a more robust opportunity. By subjecting this data to the economist's favorite magic trick—a statistical wonder known as regression analysis—it's possible to tease out the effect of any one factor (in this case, a person's first name) on her future education, income, and health.
The data show that, on average, a person with a distinctively black name—whether it is a woman named Imani or a man named DeShawn—does have a worse life outcome than a woman named Molly or a man named Jake. But it isn't the fault of his or her name. If two black boys, Jake Williams and DeShawn Williams, are born in the same neighborhood and into the same familial and economic circumstances, they would likely have similar life outcomes. But the kind of parents who name their son Jake don't tend to live in the same neighborhoods or share economic circumstances with the kind of parents who name their son DeShawn. And that's why, on average, a boy named Jake will tend to earn more money and get more education than a boy named DeShawn. DeShawn's name is an indicator—but not a cause—of his life path.
super-black names that black mothers started giving their babies during the Black Pride era:
"The typical baby girl born in a black neighborhood in 1970 was given a name that was twice as common among blacks than among whites. By 1980 she received a name that was twenty times more common among blacks."
Levitt and Dubner show strikingly little sympathy toward blacks who have a harder time getting called in for a job interview because, as shown by numerous "audit studies", employers are dubious of DeShawns and Darnells.
"Was he rejected because the employer is a racist and is convinced that DeShawn Williams is black? Or did he reject him because ‘DeShawn’ sounds like someone from a low-income, low-education family?"
Sure, as the authors imply, a boy named DeShawn may indeed be, on average, more likely to goldbrick or to rip off his employer than a boy named, say, "Dov" (the male name with the most educated parents according to the book).
Following their Naturist inclinations, Levitt and Dubner conclude:
"And that's why, on average, a boy named Jake [the whitest common male name] will tend to earn more money and get more education than a boy named DeShawn. A DeShawn is more likely to have been handicapped by a low-income, low-education, single-parent background. His name is an indicator—not a cause—of his outcome. Just as a child with no books in his home isn't likely to test well in school, a boy named DeShawn isn't likely to do as well in life."
Figlio cleverly looked at siblings, and found that the ones with the blacker names tended to get rated more poorly by their schoolteachers even when their test scores were the same.
The 20 Whitest Girl Names
The 20 Blackest Girl Names
Most Popular Girl Crossover Names
Most Popular Boy Crossover Names
The 20 Whitest Boy Names
The 20 Blackest Boy Names