NEWS

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January 10, 2006

Levitt stands firm on Freakonomics claim

Freakonomics, the best-selling book from U of C economics professor Steven Levitt, has been lauded as one of this year’s most successful releases. With over a million copies in print, the work has spent 32 weeks on The New York Times bestseller list, and it is among the most popular books in The Wall Street Journal’s business category.

However, Levitt and his book came under fire last month when two economists at the Federal Reserve Bank (FRB) criticized one of his studies. Christopher Foote and Christopher Goetz, FRB economists, questioned the research that led to Levitt’s controversial claim that the legalization of abortion directly correlates with a drop in American crimes rates.

Levitt’s study of the statistical correlation between the legalization of abortion by Roe v. Wade in 1973 and a drop in crime in the 1990’s has sparked a heated debate amongst his critics. Levitt used statistical data to support the notion that legalized abortion is directly linked to a drop in crime. He claims that when abortion is legalized, unwanted fetuses are not born to become teenagers who are more likely to commit crimes.

In his argument, Levitt puts forth six types of analyses to support the link between abortions and decreased crime. Foote and Goetz have criticized the sixth type of analysis, claiming it does not correlate to its explanation in the book. They argue that if the analysis described in the book were actually carried out, the size of Levitt’s estimate of crime rates would shrink dramatically. Levitt openly admitted his mistake, but added that after his revised estimate the numbers still remain “large and statistically significant.”

Foote and Goetz also argue that Levitt’s analysis could not reveal whether abortion reduced crime because of the fetuses’ “unwantedness.” By using an alternative method, Foote and Goetz did not find evidence that “unwantedness” was important in the abortion equation.

In response, Levitt claimed that the economists’ measure of abortion “is extremely crude and noisy,” meaning their analysis contained methodological errors. He added that when he followed Foote and Goetz’s suggestion and corrected for his initial mistake with a better measure of abortion, his calculations once again yielded the original results.

Allen Sanderson, lecturer in economics, defended his colleague: “My sense is that Levitt is 100 percent correct in the theory of all this,” Sanderson said. “Aborted fetuses are more likely to come from unwanted pregnancies for whatever reason, and thus abortion is not random (or representative) across a population, and it could therefore have some disproportionate impact on some outcomes. How strong the impact is—on crime in this case—is an empirical question, and one that [Levitt] and his critics will still be arguing about a year from now.”

In Freakonomics, Levitt uses statistics and basic economic principles to expose “hidden truths” in modern society. The book’s topics include exposing cheaters in sumo wrestling and uncovering dishonest teachers in the Chicago Public Schools (CPS).

In some ways, Freakonomics is more a chronicle of Levitt’s indicting economic studies, which have provided insight into the illicit drug market and resulted in the firing of several CPS teachers who dishonestly administered standardized tests. Although his studies have often adopted a political tinge, Levitt insists he does not bring a personal bias to the situation; he said he strives to explain situations from an objective and empirical perspective.

“Steve Levitt is one of the most creative economists I have ever known, and it’s a testament to the quality of his mind and work that he has been able to get a lot of other bright economists to spend time and research effort on issues that are of interest to him,” Sanderson said. “He also does not have an ideological dog in this fight; he simply engages in what are very interesting empirical questions.”

Levitt is currently working on a paper in response to Foote and Goetz.