Levitt and Dubner are back with new examples of how incentives make people do the darnedest things
Global Cooling, Patriotic Prostitutes
and Why Suicide Bombers Should Buy Life Insurance
By Steven D. Levitt and Stephen J. Dubner
Morrow; 270pp; $29.99
In their second outing, economist Steven D. Levitt and journalist Stephen J. Dubner have gone to even greater lengths to portray themselves as wild and crazy outsiders. While their best-selling 2005 book, Freakonomics, had a surreal fruit on the cover (apple outside, orange inside), SuperFreakonomics has the same fruit exploding. Their new title evokes Rick James, the outré King of Funk who sang the 1981 hit Super Freak. Inside this "freakquel" we find suicide bombers and crash-test dummies, kidneys and foreskins, kangaroo farts, and an anti-global-warming "garden hose to the sky."
But here's the funny thing: The underlying message of SuperFreakonomics is not wild and crazy at all. As readers of Freakonomics discovered, Levitt and Dubner are true believers in mainstream economics. It is almost a religion with them that incentives matter and people respond to those incentives in predictable ways. The strength of this book, as of the original, is in how it applies the time-tested tools of economics in unusual places to turn up surprising conclusions. For example, the authors discover that some women who have ordinary jobs will matter-of-factly work as prostitutes when the price of such services rises because of a seasonal spike in demand.
This application of standard economics to everyday life is inventive, entertaining, and even useful, but it is not, as a cover line promises, "explosive." Gary Becker, 78, the great University of Chicago economist who won a Nobel prize in 1992, has been mining this vein for decades, applying the tools of economics to study the family, drug addiction, and more. Levitt, who is 42, freely acknowledges the debt to his elder. In fact, Levitt directs a center on price theory named after Becker at the University of Chicago's Booth School of Business.
There actually is an explosive new idea in economics, but you won't find much of it in the pages of SuperFreakonomics. The new idea is to drag into economics the common-sense observation that people are often short-sighted, emotional, and irrational—even acting against their own best interests. Such things as addiction, procrastination, and spitefulness, which don't fit comfortably into the traditional paradigm of economics, are the meat of this new area of behavioral economics. The controversial yet burgeoning specialty has spawned general-interest books such as Nudge by Richard Thaler and Cass Sunstein and Predictably Irrational by Dan Ariely.
It's not as if Levitt and Dubner are unaware of behavioral economics. In 2008, Levitt wrote a rave blurb for Nudge, which is by two of his University of Chicago colleagues. He called it "one of the few books I've read recently that fundamentally changes the way I think about the world."
There's not much evidence in SuperFreakonomics that behavioral economics has fundamentally changed the way Levitt thinks about the world. He and Dubner still seem wedded to the traditional view that whatever people do must, by definition, be in their own self-perceived best interest. True, there are nods to human fallibility. At one point they write that "knowing and doing are two different things, especially when pleasure is involved." Elsewhere they acknowledge that people's actions are shaped by a "dazzlingly complex" milieu, which would presumably include jealousy, fear, bias, peer pressure, status consciousness, and advertising. But then they assert that people are the captains of their own ships after all: "We act as we do because, given the choices and incentives at play in a particular circumstance, it seems most productive to act that way. This is also known as rational behavior, which is what economics is all about." Those sentences, with their resolute faith in the coherence of human thought, could have been written 50 years ago.
What you do get in SuperFreakonomics is many more of the oddball stories that made Freakonomics so popular, with more than 4 million copies sold in 35 languages. One provocative section is on the power of cheap and simple fixes for seemingly intractable problems. The "garden hose to the sky," for example, would pump sulfur dioxide into the stratosphere to cool the planet and offset global warming. Former Microsoft (MSFT) Chief Technology Officer Nathan Myhrvold is behind the idea.
Overall, the freakquel is a lot like the original, in recognition of a time-tested economic theory: Don't mess with success. One change is that the chapters no longer open with adulatory mini-profiles of the economist co-author, Levitt, by the journalist co-author, Dubner. And this time, Dubner's name appears next to Levitt's on the cover rather than beneath it. That's appropriate because only a small fraction of the stories are based on Levitt's own research.
The authors of SuperFreakonomics are not quite as edgy as their publisher makes them out to be. Then again, they don't need to be: The world is full of crazy stuff that standard, off-the-shelf economic tools can help explain perfectly well.
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SuperFreakonomics' section on climate change has set off a firestorm in the blogosphere. On their own blog, Levitt and Dubner insist they are not "global-warming deniers" and that they intended only to describe possible solutions.
To read the authors' blog, go to http://bx.businessweek.com/global-climate-change/reference