The dismal science can be great fun — just chill out and follow the plot

IF YOU have only read one economics book — and one is, understandably, too many for some people — it was probably Freakonomics.

Perhaps Milton Friedman or John Maynard Keynes have sold more — I don’t know — but how many of us got past the first 10 pages?

Freakonomics was different. It made economics fun — sexy, even — by applying all the discipline’s tools to everyday life. It was a bit rough around the edges but fascinating nonetheless and became the publishing sensation of 2005.

It was built around the work of Steven Levitt from the University of Chicago who had been profiled in the New York Times by the journalist Stephen Dubner. The book was an expanded version of that profile studded with examples of Levitt setting off intellectual firecrackers by drawing counter-intuitive conclusions from a mass of statistics.

Levitt’s most famous — or infamous — finding was that legalising abortion cut crime because the terminated foetuses were disproportionately likely to have grown up to be hoods. Freakonomics also explained how having a swimming pool is more dangerous than owning a gun — more children die accidentally in pools than as the result of stray bullets, apparently.

It was all much more interesting and accessible than the Laffer curve or the quantity theory of money. But if Freakonomics was greeted with considerable acclaim — by non-economists, at least — the follow-up, Superfreakonomics, has proved more controversial. It’s not as though the authors ever promised to be our economic saviours delivering easily digestible answers to the banking crisis or executive remuneration. Instead, it’s true to the original, packed with new insights such as how car seats probably don’t save lives and how women’s lib has hurt education by providing the fairer sex with a whole array of new career options beyond being schoolmistresses.

What has caused all the rumpus is the final chapter of the new book on global warming.

Subversively, the authors suggest that climatologists, like everyone else, respond to incentives in a way that shapes their conclusions. “The economic reality of research funding, rather than a disinterested and uncoordinated scientific consensus, leads the [climate] models to approximately match one another.”

In other words, climatologists are as susceptible as anyone else to a herd mentality. As you can imagine, this goes down very badly indeed with the believers in catastrophic climate change (Have you noticed how all climate change is apparently catastrophic nowadays, even though some of us wouldn’t mind a couple of extra degrees at this time of year?).

The “global warmists” never like having their bubbles pricked at the best of times but when it happens in a book that’s bound to fly off the shelves of airport bookshops, they get very scratchy indeed.

Dubner and Levitt insist they are not climate change deniers, but their chapter provides plenty of ammunition for people who are. In their discussion of geo-engineering, the deliberate modification of the environment to prevent climate change, they outline a scheme to pump sulphur dioxide into the atmosphere to mimic the effect of a large volcanic eruption and cool the earth. If it worked, this approach would be a cheap-as-chips way to handle climate change — but it could also undermine efforts to reduce carbon emissions.

Far from being blasé about global warming, though, it strikes me Levitt and Dubner wouldn’t have devoted a chapter to exploring far-out ways to cool the planet unless they were concerned.

What their conclusions do suggest, however, is that it might not be necessary to spend trillions for the sake of reconceiving civilisation as we know it. What some hope might be cause for the greatest new public spending project in decades would be a waste of time.

Is that why there is such a hue and cry, one wonders? Perhaps that’s too cynical. Many of the fears of social catastrophe as a result of climate change are no doubt sincere, but it would be an enormous pity if Superfreakonomics were to be written off just because some people draw unwanted conclusions from a single chapter of the book. Besides, you’d be missing out on a lot of the fun to be had in the other chapters. Levitt and Dubner’s typically provocative discussion of the economics of prostitution is a case in point.

Among other things, the authors consider the changes in the relative prices of various sex acts since the early 20th century. They’ve plummeted over the past 100 years, it seems, as more wives and girlfriends are prepared to indulge their lovers now that acts that were once taboo have become acceptable in the wider culture. In other words, prostitutes and their clients are rational beings and the whole business operates according to the laws of supply and demand.

The two Steves also dwell on the effect on earnings of being employed by a pimp — not something you’d see discussed in too many other economics books. Apparently, by selecting clients carefully, pimps enable prostitutes to stay safe and work less but earn more, even after the pimp’s commission: “The real puzzle …(is) why more women don’t choose this career”.

The authors contrast this with a study of estate agents in Wisconsin who also act as middlemen between buyers and sellers, but are less likely to earn their commission because houses sold by owners over the internet fetched about the same price as those sold by real estate agents.

The chapter on the economics of being a suicide bomber is just as fascinating. It had never occurred to me that banks can use powerful algorithms to sift through their databases for patterns, looking for young men with Muslim names who don’t have savings accounts or life insurance, for instance.

THEY are also less likely to withdraw cash on Friday afternoons when Muslims attend prayer services and tend to make large deposits followed by lots of smallish cash withdrawals, and use few cheques or direct debits. The lesson is clear: a budding terrorist wanting to hide his tracks should change his name and take out a life insurance policy to avoid detection by the secret services and their friends in the banks’ IT departments. Why the authors are handing out such advice to those who want to blow us up, though, I’m unsure.

Superfreakonomics isn’t perfect, by any means. Personally, I find the logo below the title informing you — “They’re back!” — irritating in the extreme. The pimp’s effect on earnings is referred to as the “pimpact”, which is a bit cringe-making. But aware that people might wonder if they have been pressured into a follow-up before they were ready, Levitt and Dubner reassure readers in the preface that they deliberately waited four years until they were sure they had enough high-quality material.

Rather than pretending to be able to heal the world, books like Superfreakonomics stand or fall on their entertainment value. And on that count, there’s no doubt: it’s a page-turner. Levitt and Dubner’s discoveries are as exciting as any detective fiction.

Superfreakonomics, perhaps surprisingly, is immune from one economic law — that of diminishing marginal returns. Its critics need to practise what they preach and cool down a bit.

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