Wednesday, September 23, 2009

Why Freakonomics was great

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

--Henry Hazlitt

I got the book "Freakonomics" shortly after it came out. It was my first dose of "pop science" reading and I enjoyed the book very much. What I didn't realize until a few years later, after recently reading some newer pop science economics, was why Freakonomics was, and still is, the best of the lot.

Hazlitt ("Economics In One Lesson") condemned Keynesian economists for failing to properly connect economic policies with future consequences. The Keynesians counter: 'in the long run, we're all dead'. Now it is just expected of the Grand Poobahs of economics that they have the intelligence and resolve to fix any problem that comes along, and we generally see any care of the past or the future thrown out the window. Bernanke tells us not to worry about inflation tomorrow, because tomorrow is tomorrow and we only need to worry about today. Go shopping! They'll take care of it when it becomes an issue.

I specifically recall two studies in the book that led me to write this blog (admittedly, I did not read it recently or even scan through it--I'm going on memory alone here). First, Dr. Levitt attempted to find out what happened to crime rates, which led him back in time to an unexpected causation: legalization of abortion. And later he sought to find an answer to the nature-nurture question and parenting methods.Both of these studies called for looks into the past and a search for long-term relationships between causation and consequence. Unfortunately, applying rational principles to 'freakonomics' is insightful, applying those same principles to real economics is obscure, arcane, anachronistic, out of the question.....

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