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Steven Levitt & Stephen J. Dubner

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Steven D. Levitt & Stephen J. Dubner

Steven D. Levitt (born 1967) is an economist and professor at the University of Chicago, where he holds a named chair and co-directs the Becker Friedman Institute. He is one of the most cited economists of his generation, known for applying economic methodology to non-traditional subjects including crime, education, and cheating.

Stephen J. Dubner (born 1963) is a journalist, author, and former New York Times writer who partnered with Levitt after profiling him for the Times Magazine. Together they co-wrote Freakonomics (2005), which became a cultural phenomenon, spawning sequels, a podcast, and a documentary. Dubner serves primarily as the narrative translator of Levitt’s economic analysis for general audiences.

Freakonomics (2005)

Freakonomics is not a systematic economic treatise but a collection of case studies united by a methodological approach: applying rigorous economic analysis (particularly regression analysis and incentive thinking) to questions that seem far removed from traditional economics. Its power is partly in the substance of its findings and partly in demonstrating that the economist’s toolkit can illuminate almost any human behavior.

The Methodological Core

The book rests on four foundational claims about how to understand human behavior:

  1. Incentives are the cornerstone of modern life.
  2. Conventional wisdom is often wrong.
  3. Dramatic effects often have distant, even subtle causes.
  4. Experts use their informational advantage to serve their own agendas.
  5. Knowing what to measure and how to measure it makes a complicated world much less so.

“Incentives are the cornerstone of modern life. And understanding them — or, often, ferreting them out — is the key to solving just about any riddle.” — Levitt and Dubner, Freakonomics

“Morality, it could be argued, represents the way that people would like the world to work — whereas economics represents how it actually does work.” — Levitt and Dubner, Freakonomics

The Incentive Framework

The three categories of incentives — economic, social, and moral — and their interactions are the book’s primary analytical tool:

“There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties.” — Levitt and Dubner, Freakonomics

The day-care penalty example shows how replacing one type of incentive with another can reverse the intended effect: a fine converted guilt (moral incentive) into a transaction (economic incentive), making late pickups more common, not less.

Information Asymmetry

The section on real estate agents is the clearest treatment of how information asymmetry enables expert self-dealing:

“It is common for one party to a transaction to have better information than another party. In the parlance of economists, such a case is known as an information asymmetry.” — Levitt and Dubner, Freakonomics

Real estate agents who sell their own homes leave them on the market longer and achieve higher prices than when selling clients’ homes. The incentive structure explains this: a marginally higher sale price is worth more to the seller than to the agent (who earns a small percentage), so the agent optimizes for transaction speed.

“The incentives of the real-estate business, as currently configured, plainly encourage some agents to act against the best interests of their customers.” — Levitt and Dubner, Freakonomics

The Crime Drop

The most famous and controversial finding: the dramatic drop in US crime in the 1990s was significantly caused by the legalization of abortion in 1973:

“They were the very women whose children, if born, would have been much more likely than average to become criminals. But because of Roe v. Wade, these children weren’t being born. This powerful cause would have a drastic, distant effect: years later, just as these unborn children would have entered their criminal primes, the rate of crime began to plummet.” — Levitt and Dubner, Freakonomics

This finding exemplifies the book’s methodological signature: the cause is distant in time (by 15-20 years), uncomfortable to discuss, statistically verifiable, and invisible to conventional narrative explanations.

The Crack Gang Economics

The analysis of crack gang economics demonstrates the application of standard labor economics to illicit markets:

“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.” — Levitt and Dubner, Freakonomics

“A foot soldier had plenty in common with a McDonald’s burger flipper or a Wal-Mart shelf stocker… most of J. T.’s foot soldiers also held minimum-wage jobs in the legitimate sector to supplement their skimpy illicit earnings.” — Levitt and Dubner, Freakonomics

The labor economics of crime: the wage structure of a crack gang is identical to any tournament labor market — foot soldiers earn subsistence wages while competing for the few high-paying leadership positions. The glamour of the prize makes the expected value of participation seem attractive despite the terrible average outcomes.

Parenting and Outcomes

The analysis of what parenting factors predict child outcomes (test scores, life outcomes) distinguishes what parents are from what parents do:

“To overgeneralize a bit, the first list describes things that parents are; the second list describes things that parents do. Parents who are well educated, successful, and healthy tend to have children who test well in school; but it doesn’t seem to much matter whether a child is trotted off to museums or spanked.” — Levitt and Dubner, Freakonomics

The provocative implication: who the parents are matters more than what the parents do, by the time they are reading parenting books.

The KKK and Information as Power

The comparison of the KKK to a real estate cartel — as organizations that derive power from information monopoly:

“The Ku Klux Klan — much like politicians or real-estate agents or stockbrokers — was a group whose power was derived in large part from the fact that it hoarded information. Once that information falls into the wrong hands… much of the group’s advantage disappears.” — Levitt and Dubner, Freakonomics

“Information is a beacon, a cudgel, an olive branch, a deterrent — all depending on who wields it and how.” — Levitt and Dubner, Freakonomics

Correlation vs. Causation

Levitt is meticulous about the distinction:

“A correlation simply means that a relationship exists between two factors… but it tells you nothing about the direction of that relationship.” — Levitt and Dubner, Freakonomics

The name-and-life-outcomes analysis makes this vivid: Black names are correlated with worse life outcomes, but the name is not the cause. The same socioeconomic circumstances that produce the name produce the outcomes. Changing the name would not change the outcome; changing the circumstances would.

Intellectual Style and Legacy

Levitt and Dubner’s contribution is primarily methodological. They demonstrated that:

  1. Almost any human behavior can be analyzed through economic incentives
  2. Statistical analysis can reveal causal patterns invisible to intuition
  3. “Rogue” application of rigorous methods to unexpected domains produces genuine insight
  4. The public is interested in economic reasoning when it is applied to questions they actually care about

Freakonomics launched a genre of “pop economics” (including Superfreakonomics, Levitt and Dubner’s sequel, The Undercover Economist by Tim Harford, Predictably Irrational by Dan Ariely, and many others) and contributed to the broader popularization of behavioral economics.

Methodological Controversies

Several Freakonomics findings — particularly the abortion-crime link — have been challenged in the academic literature, with some researchers arguing that the statistical methods are inadequate or that the findings don’t replicate. Levitt has defended the abortion-crime thesis through multiple critiques. The broader methodological approach (regression analysis of observational data to identify causal effects) is legitimate but genuinely difficult to execute without bias, and the authors are sometimes accused of overconfidence in their causal claims.

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