Dinner parties are a microcosm of the challenges we face. There's always someone who hears what you are, rolls his eyes and takes whatever steps are necessary to sit far from you at dinner. Or else someone will approach and unburden his soul about a terrible economics professor he had in college -- who used too much math, was too little of a humanist and gave him a poor grade which, in turn, kept him out of some top law school. You also usually encounter a junior-captain-of-industry-Alex-Keaton type who tells you about how much he loved that same economics professor pilloried in the previous sentence, and that he would not mind teaching economics when he retires. Funny, it keeps me and my colleagues pretty busy even when it's our full-time jobs.
There is one ray of hope, however, for economists at the dinner party. Someone invariably asks, "Do you know Steven Levitt?" (for the record, the answer is a little, as economists' circles do tend to overlap), and the question can be a lifeline to any economist trying to get the dinner party -- and one's social standing -- back on track.
Levitt and co-author Stephen Dubner's new book "Super Freakonomics" is a follow-up to their super smash 2005 bestseller, "Freakonomics." Thank goodness they are back -- with wisdom, wit and, most of all, powerful economic insight.
The world, however, has changed since "Freakonomics," and now everyone questions the worthiness of economists during our current financial crisis. Can the Steves help us get our economic groove back? Yes. But let's first begin with what the authors do not claim to be, and what the book is not about -- they do not pretend in "Super Freakonomics" to be our economic saviors. They don't provide solutions to the financial crisis, subprime debt, CEO compensation or a template for healthcare reform.
Rather, the Steves wryly, humorously and almost sadistically remind us that we are slaves to our own failures to parse situations into basic economic components. They consider three key areas: first, we must understand individual incentives and how this drives strategic behavior; we also need to understand market behavior and how changes in government policy or social culture can help us to better understand individual incentives; and third, little can be understood without finding some data and thoughtfully dissecting it.
The examples the authors use in "Super Freakonomics" won't disappoint, though these are now more concentrated on edgier topics. Prostitution, terrorism and the altruistic indeterminacy of just about everything form much of the landscape in this book. Topics are simultaneously interesting and profoundly disturbing -- in other words, freaky. The book runs the gamut on prostitution -- from pimps to chimps -- teaching us about the hidden excitement of old-time Chicago family summer gatherings and that policemen enjoy more than just doughnuts on patrol. We also learn who becomes a terrorist and how they could hide themselves better from the prying eyes of cyber-profilers just by covering their spending and demographic trails. Grim stuff.
The concepts of "good" and "bad" are also investigated, and both come up short. We learn that TV is neither good nor bad -- in India, there is evidence that it has actually led to social change that has improved women's lives, while in the U.S. there is evidence that increased TV exposure is associated with increases in higher levels of property and violent crime. They also present ample studies that suggest, "People aren't 'good' or 'bad.' People are people and they respond to incentives. They can nearly always be manipulated -- for good or ill -- if only you find the right levers." Hmm. Perhaps this explains why economists are not too popular at dinner parties.
There are a few things, however, that the Steves could have presented better. The opening chapter on the economics of gender delves pretty hard into the costs of being a woman (the economics of prostitution, for example, and the pervasiveness of the male-female wage gap) and does not give much airtime to the benefits. I presume there are some. For example, they could have considered research on the effect that the Pill had on society, and its corresponding impact on women's economic and social opportunities.
"Super Freakonomics" also tiptoes around important public policy debates such as healthcare and doesn't dare venture into any sort of policy prescriptions using the political vernacular of the day. To be fair, however, the book's mantra is applicable to all policy discussions. Namely, unless you understand the individual and market incentives created by policy, the law of unintended consequences will eventually doom all reforms. Take note, Congress as we redraw the map on healthcare and financial regulation (not, I fear, for the last time).
Surprisingly, the book left me hopeful that we can tackle seemingly intractable social problems. Human ingenuity is clearly in no short supply in "Super Freakonomics," and we can thank Steve and Steve for making Le Freak still chic.
Hess is Russell S. Bock Professor of Public Economics at Claremont McKenna College.