Grasping Reality on TypePad, by Brad DeLong

Maybe Money Does Make the World Go Round

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Three most recent discussions Re: black list-white list colleges Today at 11:37:47 AM by frogmanatbac1 Re: Your Age: Young adjuncts/teachers/professors Today at 11:37:12 AM by infopri Re: Need suggestions for dealing with narcissistic person Today at 11:34:12 AM by whirledtraveler By J. BRADFORD DELONG

In the beginning were the Steves — Steven D. Levitt and Stephen J. Dubner, that is. And Dubner interviewed Levitt, who teaches at the University of Chicago and had won the American Economic Association's Clark Medal as the outstanding young economist in his two-year cohort. And Dubner and Levitt brought forth Freakonomics (William Morrow, 2005), which sold many copies and populated the land. And the publishers of America looked upon Freakonomics and saw that it was good.

And the publishers of America said, "Let us commission and publish many books sort of like Freakonomics, for here is a previously unexploited market segment, books that use economists' reasoning presented in clear prose to investigate and explain curious events and patterns in our lives."

And Basic Books and Robert H. Frank begat The Economic Naturalist (2007). And Free Press and Steven E. Landsburg begat More Sex Is Safer Sex (2007). And Dutton Press and Tyler Cowen begat Discover Your Inner Economist (2007).

If you have not read Freakonomics, read it first. Levitt's ideas and work are justly respected by economists, and he and Dubner have done a very good job of applying economic principles to social patterns involving crime, abortion, drug dealing, parenting, and other matters. I don't think they get every issue right, but they do make every issue they tackle accessibly interesting. And though their discussions are provocative, the provocation is appropriately secondary to the logic.

If you have read Freakonomics and are a liberal, read Cowen's Discover Your Inner Economist for elucidating discussion toward the libertarian-conservative end of the spectrum. If you have read Freakonomics and are a conservative, read Frank's The Economic Naturalist for equally admirable discussion toward the social-democratic end. Either way you'll find yourself more intellectually balanced.

Consider, for example, Cowen's discussion of tourists from affluent countries who travel in poor countries and find local guides and beggars waiting outside hotels. For the guides and beggars, waiting for the rare generous tip or gift is better than other available options — but not much better. More generous and well-intentioned visitors do not improve the well-being of local guides so much as they simply multiply their numbers. People who would otherwise be doing something useful wait instead for the relatively big score, and increased generosity becomes a social loss.

So what should an ethical liberal do? Many flint-hearted libertarians anxious to cast scorn on woolly-headed liberals would stop at this point, smugly pointing out that liberal generosity is counterproductive. Cowen goes a step further, and asks what a non-woolly-headed liberal who actually wanted to help would do. He has a simple answer: Get off the beaten track. Find somebody who is both poor — not just looking poorer than they are in the hope of attracting generosity — and busy doing something productive and useful. Give them the money. As Cowen puts it, "If you are going to give, pick the poor person who is expecting it least." That accomplishes the most efficient transfer of wealth.

Frank makes conservatives think about markets as good but flawed social instruments. Over the past couple of decades, the Cornell professor has asked his students to write 500 words on what he terms "economic naturalism": Using a principle of economics taught in the course, he instructs, "pose and answer an interesting question about some pattern of events or behavior that you personally have observed." The Economic Naturalist is made up of Frank's own best answers to that question, combined with credited and rewritten contributions from his students.

My favorite comes from Lonnie Fox: Why don't top-ranked private universities charge higher tuitions than lower-ranked ones? Fox's answer is that capable students are both customers for and producers of college educations. A college with a higher-ranked student body will have more challenging classes attractive to high-ranked students. A college is selling not just the services of its faculty and library but the chance to interact with other smart, lively, and curious students. Were Yale to raise its tuition to a level at which it began losing significant numbers of students to cheaper Wesleyan, it would find that some of its appeal to top-ranked students had vanished. "The top-ranked school," Frank argues, "needs its most accomplished students every bit as much as they need it."

My second favorite contribution to the book is by Thomas Gellert, on the demise of Caspian Sea sturgeon since the collapse of the Soviet Union starting in 1989. Before then, only two political jurisdictions bordered the Caspian Sea: Iran and the U.S.S.R. Now Iran, Russia, Kazakhstan, Turkmenistan, and Azerbaijan all border it and have been unable to negotiate fishing limits. The Caspian sturgeon population, and thus the world production of Beluga caviar, has suffered as a result.

The pop-econ genre's defect is oversimplification. Too often case studies read like just-so stories, things that might be true but that might not. The Economic Naturalist makes sense of the world, but so did Lamarck, who argued that giraffes' long necks spring from generations of giraffes each trying very hard to stretch their own individual necks to reach higher leaves, and then passing those stretched necks down to descendants. Ashees Jain may have been a good student at Cornell, but do we really want to say that the reason for the absence of top-ranked for-profit universities is that gifts to nonprofit universities are tax deductible while tuition payments to both nonprofits and for-profits are not? Surely there is more to it than that. Or take Fox's tuition explanation. We here at Berkeley charge one-third the tuition of Stanford. Our students like a place where their peers don't regard themselves as rich. We lose students who believe that the extra $80,000 is well worth paying to get Stanford's smaller class sizes and better physical plant.

Oversimplification might be a price worth paying for the pleasures of an economic window on the world. Provocation for provocation's sake, however, is not.

Which brings us to Landsburg's book, the weakest of the batch. Landsburg, of the University of Rochester, works hard too hard — at being counterintuitive and shocking. Is it true that, as far as AIDS is concerned, "more sex is safer sex"? Probably not. Not only would the chaste have to become more adventurous, but they would have to become more adventurous in a way that sufficiently reduces the sexual contact that the already adventurous have with each other. That is, the key is not more sex but the shift from very risky to only somewhat risky sex — not quite what the title advertises.

I also refuse to believe Landsburg is serious in his argument that Americans should not care about the looting of Baghdad's museums. Landsburg claims that "water in the aggregate is priceless. ... But ... we don't cry every time someone spills a bucket of water. ... Likewise, antiquities in the aggregate enrich our lives ... but ... we don't have to cry every time someone loots a museum." We cry over destruction or loss when the things that are destroyed or lost are valuable. A bucket of water isn't valuable, so we don't cry over it — unless we're in the desert, where it is valuable, and then we do. If I thought Landsburg was sincere in his proposition, I would have to reach certain judgments about him that I would rather not.

You could read his book if you have read the others and are insatiably hungry for more.

Or you could wait — another's bound to come along soon. Economics dictates it, as some economist will no doubt elucidate for us in enjoyable if unnuanced fashion.