Books on economics seldom make the New York Times best-seller list, but Steve Levitt’s “Freakonomics: A Rogue Economist Explores the Hidden Side of Everything” has been there for 34 weeks.
Levitt, 38, grew up in the Twin Cities and graduated from St. Paul Academy. After his undergraduate work at Harvard University, he got a Ph.D. in economics at the Massachusetts Institute of Technology.
In 1994, the American Economic Association awarded him the John Bates Clark medal, which is given to the most outstanding economist under age 40. Twelve of the 20 people who received this award before Levitt went on to win a Nobel Memorial Prize in Economics.
At age 30, Levitt joined the faculty at the University of Chicago, was promoted to full professor in just five years and he now holds an endowed chair.
“Freakonomics,” co-written by journalist Stephen Dubner and published early this year, covers a wide range of topics that many would not consider economics: Why do most drug dealers still live with their mothers? Why did crime rates drop so unexpectedly in the 1990s? Do Chicago teachers cheat when administering standardized performance tests to their students? What is more dangerous to children — guns or swimming pools? Do sumo wrestlers cheat and why?
Levitt, a father of four, agreed to an interview last week while visiting his parents, Michael and Shari Levitt, who live in Minneapolis.
Q. Why are young economists like you moving away from traditional work in economic theory?
A. There are two forces moving economics toward being more empirical. First, lots of bright people have been working on theory for a long time. Theory is a well-tilled field. It is hard to find something new. Unless there is some big paradigm shift in theory, it is hard to find new areas to work. There is also an explosion of computer power and lots of data. It is just that the relative costs of doing empirical work have dropped.
Q. How does your work differ from that of other young economists who are breaking out of traditional molds?
A. I need to make a distinction between what I do and theoretical economists do. I try to figure out what people really do. But I am anchored in the traditional economic view of the world that people respond to incentives. I’m taking a step back from “rational.” I think rational behavior has the wrong connotations.
I do think more often than not, if you raise the price of something people do less of it. If you socially stigmatize something people do less of it. I take a broad view of incentives — whether it is financial incentives, social incentives or moral incentives. When it comes to crime, moral incentives are more important than anything. I actually am a pretty traditional economist in the way I view the world.
Q. In your book you describe incentives that lead Japanese wrestlers to cheat. What about cheating in American sports?
A. I think in American sports what you get is people cheating to win rather than cheating to lose. So, for instance, we have been trying to look at doping in bike racing. All the evidence is that many of the top bike racers are doping. We are trying to find some data to prove or disprove that. Many people think that the World Series is fixed because it goes to seven games. It sounds crazy to me, but to some people in Japan it sounds crazy that top sumo wrestlers would throw a match.
Q. Ed Prescott, a longtime University of Minnesota professor, won the 2004 Nobel Prize in economics. How is your work different from his?
A. My research and his research are about as far apart as you can get. But we get along great. He spent a year at Chicago. In his inscrutable way, he had a tremendous amount of wisdom. He had insight, a way to cut through things. He is a leader, a magnet for other people, a visionary. But his view is there are two kinds of economists. There are ones who do the really important stuff — theory, big thinking — like he did. And then there are economists like me who generate information.
Q. Your father is at the medical school at the University of Minnesota. The U has set a goal of being a premier research institution. Can it succeed?
A. I think it is difficult for state universities to be premier across a wide set of disciplines. There is the funding issue; the salaries being (available to the) public issue. There is the necessary emphasis on teaching over research. These all make it hard. Certain programs can be very good but it is hard to be good across the board. But on the other hand, Minnesota has had a top economics department for over 40 years. Really, what it takes to be a top institution is great researchers. The challenge is to continually find new ones.
Q. The University of Chicago economics department has a reputation for being very free-market in its orientation and somewhat ideological. How do you fit in?
A. I think there have always been two strands. One is this free-market ideological one. The other is hard-nosed empirical — putting theory and data together to understand the world. And it only is by chance really that those two happen to be in the same department. Gary Becker (1992 Nobel Laureate and 1967 Clark medal winner) is a good example of someone who is ideological. (Milton) Friedman is as well, but at the same time is really empirical, who is also interested in data. The free-market ideological part is really fading.
I think Friedman was really the last true, ideologically driven economist at Chicago. What prevails now is different. Markets work and are important. But little of my work talks about markets. Much of my work is with the criminal-justice system, which is only in the vaguest way related to markets. I’m about figuring out answers to questions. That has always been important at Chicago.
And I get along well with other Chicago professors. There is D. Gale Johnson. We had this special bond. My first son (a baby) died of meningitis, and his wife died of meningitis, too. He sent me this note, which I still can recite parts of from memory. And then we got to talking a lot after that. His daughter was one of the first people to adopt children from China. So, two of our daughters are from China.
In the last two years of his life, Johnson had Lou Gehrig’s disease. Here was an 88-year-old man who could not talk anymore, but still came in to work nearly every day, writing journal articles. So I would go down to see him and we couldn’t talk (because of the disease), but we would just show pictures of his granddaughter and of my daughters to each other.
It was the only emotional link I ever had with a professor in the department.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.