by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The authors behind the Freakonomics books have attracted plenty of attention. Reviewing their latest book for Barron’s, economist John Lott labels that attention somewhat undeserved.
The Freakonomics franchise certainly has legs. According to legions of admirers, in their best-selling series that includes Freakonomics, SuperFreakonomics, and now Think Like a Freak, University of Chicago economics professor Steven Levitt and journalist Stephen Dubner have taught us to use economic reasoning to shed light on real-life situations. In the process, they have also shown that economics can be fun.
But the fun quotient is ultimately diminished by the fact that their stock in trade is naive economics. Typically, Levitt and Dubner fail to understand that when a problem arises in a market, it generally provides an incentive for those involved to remedy the problem.
Take the sour-lemon story. “A new car that was bought for $20,000,” they assured us in Freakonomics, “cannot be resold for more than perhaps $15,000. Why? Because the only person who might logically want to resell a brand-new car is someone who found the car to be a lemon. So if the car isn’t a lemon, a potential buyer assumes that it is.”
Stories like these have clearly appealed to those who enjoy clever portrayals of a dysfunctional world. But a little research would have revealed that, contrary to Levitt and Dubner, used cars with only a few thousand miles on them sell for almost the same price as when new. One obvious reason: Since car manufacturers allow warranties to be transferred to new owners, potential buyers know that even if they do buy a lemon, they will not be stuck with it.
In Think Like a Freak, the authors promise to teach us what “it takes [to be] a truly original thinker.” But rather than promoting original or critical thought, their book tries to convince us of one main thing: People are stupid. We are thus confronted with half-baked theories similar to those in their previous books. …
… It would be nice to believe that Think Like a Freak and its prequels have promoted interest in sound economics. But alas, when you think like a freak, you think superficially, like most freaks probably do in real life.