Highlights

Odd Numbers: Steven Levitt has lunch with the FT

At first, Steven Levitt is not sure where we should go for lunch. We’re meeting in his home city of Chicago, a place I’ve never visited, so I haven’t a clue what to suggest. He says he will get some advice and eventually comes up with the South Water Kitchen, a downtown bar and restaurant a few miles from his office at the University of Chicago.And so here, over a can of coke and an $11 hamburger, I meet the surprisingly uncontroversial looking Steven D. Levitt. Surprising because, despite his average hair, his average height and his very average shirt and chinos, the 37-year-old Levitt is one of the most notorious economists of our age.

Some critics compare him to Joseph Goebbels. Others say that he is a rabid liberal. His peers say that he has the most brilliant mind of his generation. The publishers of his first book describe him as a “rogue economist”.

Other economists may labour in obscurity over inflation rates and fiscal drag. Only Levitt has figured out how sumo wrestlers throw games to improve their tournament rankings; why drug dealers live with their mothers; how estate agents cheat their clients and which school teachers fiddle exam results to meet test standards. Why?

“Because it’s fun,” he says. “The kind of problems I like are problems which look hard but are easy. Finding cheaters often has that characteristic. I mean, your reaction is, how in the world am I going to figure out if sumo wrestlers are cheating? But cheating and incentives are so closely tied together that, by and large, if you can learn the incentives and then find someone who’s keeping score…” Then it’s easy, if you’re Steven Levitt.

The sumo wrestling paper isn’t what made him famous. Levitt blazed into public view in the summer of 1999 by puncturing a much-cherished set of myths about why crime fell in the US in the 1990s. It wasn’t the economy or “zero tolerance” crime policies, said Levitt. It was because the likely criminals of the 1990s had been aborted in the 1970s, after the Supreme Court’s Roe v Wade decision legalised abortion across the US.

In a paper co-authored with Stanford University law professor John Donahue, he showed that crime rates began to fall 18 years after the 1973 Roe v Wade decision the time when the first babies born after legalised abortion would be hitting their peak crime-committing age. The fall in crime was proportional to the number of legal abortions in each state, and in the few states to legalise abortion three years earlier, crime also fell three years earlier.

Critics leapt to condemn the pair for the imagined eugenic implications of their work, although, as Levitt complained at the time, “When a scientist presents evidence that global warming is occurring, it does not mean that he or she favours global warming.”

In fact, Levitt now says that the research made him more pro-life. “I grew up in Minnesota. Very liberal,” he says. “I was just from birth taught to be pro-choice.” But when he discovered while writing the paper that after Roe v Wade the number of abortions rose to nearly 1.5 million a year, and that while the number of births fell, the number of conceptions rose, he thought again. “One in four of the pregnancies which took place were just because people were lazy,” he says. “That’s a lot. That’s a lot of abortions.”

By 2003, Levitt’s work had brought him to the attention of the American Economic Association, which awarded him the prestigious John Bates Clark Medal, a prize given every two years to the most promising economist under 40 and whose past winners include several Nobel laureates. Levitt says he still can’t understand why he won the medal. “I was always puzzled by that.

I really was. I’ve always thought of myself as kind of a freak or a dilettante, operating at the fringes of the profession.”

He says he never had any intrinsic interest in economics, but took introductory economics in his early years at Harvard (“everyone did”) and when the teacher started describing concepts such as marginal cost, he kept thinking, “‘That’s the name for this concept which I had in my head but I didn’t know the name.’ My friends would walk out of class and say they couldn’t understand anything. But it felt like second nature to me.”

Later in 2003, Levitt was profiled in The New York Times magazine by Stephen Dubner, the journalist who co-wrote Levitt’s new book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything.

Published this week in the US, it is an expanded and simplified version of his research.

Dubner’s magazine article did a lot for Levitt’s profile, but the economist, as ever, manages to uncover hidden truths about it. “He created a totally fictional account of me, one that was far more likeable and interesting and smarter than I was, that people kind of fell in love with.

Dubner had set this tone, this fake version of me, that we both could slip into and out of as we wanted.”

I imagine the thud of head hitting desk as his publicist reads this.

There’s more. Not only are both the authors faking, so is their publisher:

“They claimed the first printing would be 150,000. That is the biggest joke in history. That’s not the printing, it’s the announced printing. Long before anybody ever prints a book, they send a signal to reviewers and bookstores about how important their book is. Not surprisingly, there’s been a very fast inflation rate. I believe our announced first printing is five times bigger than our actual first printing.” That thud again.

Levitt claims he doesn’t try to be controversial but this sounds implausible to me, and Stephen Dubner doesn’t quite believe him either. “He likes to make a splash. And he knows it’s good for him.” Dubner reminds me that Levitt ignored his assignments at the Massachusetts Institute of Technology, his graduate school, because he’d already worked out that writing papers would make more of an impact. His classmates thought he was crazy, until the University of Chicago’s prestigious Journal of Political Economy accepted one. These days, Levitt is its editor.

He is also quietly mischievous. Halfway through our interview, Levitt glances at my digital recorder. “Do you want to see if this thing’s really recording?” I don’t. I’m an economist in real life, not a journalist. This is the first time I’ve used a tape recorder to interview someone and I am terrified of touching it now I’ve switched it on. “I just know that if you’re practicing to be a journalist, every other journalist is constantly checking this thing.” No, I tell him, it’s fine. He picks it up and starts poking at it. I start to fidget with my collar. Eventually he gives up, thank God.

Levitt thanks his parents for showing him that “it’s okay to be different”.

His father was a doctor who became an authority on intestinal gas. His mother “channels” novels from the spirit world. (Levitt refuses to elaborate. “I don’t want to get into trouble. But they’re good books.”) He and his wife, Jeannette have four children and lost their fifth, Andrew, the eldest, to meningitis when the child was barely a year old.

Levitt still wears his grief openly; his acknowledgments in Freakonomics celebrate his wife and children “even though we still miss Andrew so much”.

I suggest this openness is brave, but he disagrees. “When something bad happens to you, the problem typically isn’t that everybody wants to talk about it and you don’t want to talk about it. It’s usually the opposite.

Very quickly, no one’s interested. My son Andrew dies, and my wife and I still think about him every day but nobody else does.”

The attempt to paint Levitt as an uncaring academic automaton, or worse, seems absurd. Dubner agrees. His own daughter was frighteningly ill very recently; her doctors weren’t sure of the cause but feared that it could be fatal. “Steve was on the phone to me every day, asking me for more data, discussing it with his dad, who’s a doctor. In the end I wondered how he could afford so much time to work on this. He said, ‘I’m supposed to be the guy who looks at the numbers and sees the truth. If I can’t do that for a friend, what use is it?’”

Levitt is no theorist; it is indeed his ability to draw the truth out of unco-operative data that has won him the plaudits of the profession. He does not rely on fancy statistical techniques but on lateral thinking.

Some of his most respected work answers the big questions on prisons and crime. Do prisons help prevent crime? And if so, is it because they deter criminals, or because they keep them off the streets? A crime wave is typically met by more prisons, so it’s hard to untangle cause and effect.

Levitt used simple ideas that nobody else had considered. Sometimes thousands of prisoners are released because of judicial rulings on overcrowding: this provided a test of how much crime had been prevented by locking those criminals away. (Ten per cent more prisoners means 4 per cent less violent crime.) Levitt also measured the deterrent effect of prison by showing that throughout the 1980s, as juvenile punishment grew less severe relative to adult punishment, 17-year-olds committed more crimes relative to 18-year olds.

He also has a knack for unmasking cheats. After dealing with a series of estate agents, he realised that they maximised their commissions by selling houses cheaply and quickly, because they were paid a small commission on the wholesale price, rather than a large commission on the extra value they were able to generate. But how to prove it? Levitt simply contrasted sales for clients with sales of the agents’ own houses. They take more time and get a higher price when their own cash is on the line.

As Dubner observes, “That result about real-estate agents was just sitting there for any of thousands of economists to find. But they didn’t see it.”

I know how they feel. As Levitt and I get ready to leave, I ask for his autograph on my copy of Freakonomics. I think about teasing him by boasting about the money I could get for this signed pre-publication copy on eBay, but before I do, I look at what he’s written: “To Tim, The first book I’ve ever signed. You can probably get at least $9.50 on eBay. Steve Levitt.”

23rd of April, 2005HighlightsOther Writing • Comments off