Steven Levitt

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Steven D. Levitt
Chicago School of Economics
Born (1967-05-29) May 29, 1967 (age 46)
New Orleans, Louisiana
Nationality American
Institution University of Chicago
Field Social economics
Alma mater Harvard University (A.B.)
MIT (Ph.D.)
Influences Gary Becker
James Heckman
Influenced Roland Fryer
Jesse Shapiro
Contributions Freakonomics, SuperFreakonomics
Awards John Bates Clark Medal (2003)
Information at IDEAS/RePEc

Steven David "Steve" Levitt (born May 29, 1967) is an American economist known for his work in the field of crime, in particular on the link between legalized abortion and crime rates. Winner of the 2003 John Bates Clark Medal, he is currently the William B. Ogden Distinguished Service Professor of Economics at the University of Chicago, director of the Becker Center on Chicago Price Theory at the University of Chicago Booth School of Business. He was co-editor of the Journal of Political Economy published by the University of Chicago Press until December 2007. He co-authored the best-selling book Freakonomics (2005) and its sequel Superfreakonomics (2009). He is a grand-nephew of Robert L. May, the lyricist of Rudolph the Red-Nosed Reindeer. In 2009, Levitt co-founded The Greatest Good, a business and philanthropy consulting company. He was chosen as one of Time magazine's "100 People Who Shape Our World" in 2006.[1]

Career[edit]

Levitt was born in 1967 and attended St. Paul Academy and Summit School, graduated from Harvard University in 1989 with his B.A. in economics summa cum laude, and received his Ph.D. in economics from MIT in 1994. He is currently the William B. Ogden Distinguished Service Professor and the director of The Becker Center on Price Theory at the University of Chicago. In 2003 he won the John Bates Clark Medal, awarded every two years by the American Economic Association to the most promising U.S. economist under the age of 40. In April 2005 Levitt published his first book, Freakonomics (coauthored with Stephen J. Dubner), which became a New York Times bestseller. Levitt and Dubner also started a blog (www.freakonomics.com). Levitt is an honorary professor at McGill University.

Work[edit]

His work on various economics topics, including crime, politics and sports, includes over 60 academic publications. For example, his An Economic Analysis of a Drug-Selling Gang's Finances (2000) analyzes a hand-written "accounting" of a criminal gang, and draws conclusions about the income distribution among gang members. In his most well-known and controversial paper (The Impact of Legalized Abortion on Crime (2001), co-authored with John Donohue), he shows that the legalization of abortion in the US was followed approximately eighteen years later by a reduction in crime, then argues that unwanted children commit more crime than wanted children and that the legalization of abortion resulted in fewer unwanted children, and thus a reduction in crime as these children reached the age at which many criminals begin committing crimes.

Crime[edit]

Among other papers, Levitt's work on crime includes examination of the effects of prison population, police hiring, availability of LoJack anti-theft devices and legal status of abortion on crime rates.

The Impact of Legalized Abortion on Crime[edit]

See The Impact of Legalized Abortion on Crime for a detailed discussion of the issue.

Revisiting a question first studied empirically in the 1960s, Donohue and Levitt argue that the legalization of abortion can account for almost half of the reduction in crime witnessed in the 1990s. This paper has sparked much controversy, to which Levitt has said

"The numbers we're talking about, in terms of crime, are absolutely trivial when you compare it to the broader debate on abortion. From a pro-life view of the world: If abortion is murder then we have a million murders a year through abortion. And the few thousand homicides that will be prevented according to our analysis are just nothing—they are a pebble in the ocean relative to the tragedy that is abortion. So, my own view, when we [did] the study and it hasn't changed is that: our study shouldn't change anybody's opinion about whether abortion should be legal and easily available or not. It's really a study about crime, not abortion."[2]

In 2003, Theodore Joyce argued that legalized abortion had little impact on crime, contradicting Donohue and Levitt's results ("Did Legalized Abortion Lower Crime?" Journal of Human Resources, 2003, 38(1), pp. 1 –37.). In 2004, the authors published a response,[3] in which they claimed Joyce's argument was flawed due to omitted-variable bias.

In November 2005, Federal Reserve Bank of Boston economist Christopher Foote and his research assistant Christopher Goetz, published a working paper,[4] in which they argued that the results in Donohue and Levitt's abortion and crime paper were due to statistical errors made by the authors: the omission of state-year interactions and the use of the total number of arrests instead of the arrest rate in explaining changes in the murder rate. When the corrections were made, Foote and Goetz argued that abortion actually increased violent crime instead of decreasing it and did not affect property crime. They even concluded that the majority of women who had abortions in the 1970s were middle class whites rather than low income minorities as Levitt stated; this was, they stated, because white middle class women had the financial means for an abortion. The Economist remarked on the news of the errors that "for someone of Mr Levitt's iconoclasm and ingenuity, technical ineptitude is a much graver charge than moral turpitude. To be politically incorrect is one thing; to be simply incorrect quite another."[5] In January 2006, Donohue and Levitt published a response,[6] in which they admitted the errors in their original paper but also pointed out Foote and Goetz's correction was flawed due to heavy attenuation bias. The authors argued that, after making necessary changes to fix the original errors, the corrected link between abortion and crime was now weaker but still statistically significant, contrary to Foote and Goetz's claims.

Prison population[edit]

Levitt's 1996 paper on prison population uses prison overcrowding litigation to estimate that decreasing the prison population by 1 person is associated with an increase of fifteen Index I crimes per year (Index I crimes include homicide, forcible rape, robbery, aggravated assault, burglary, theft, motor vehicle theft, and arson).[7]

Police hiring[edit]

In a 1997 paper on the effect of police hiring on crime rates, Levitt uses the timing of mayoral and gubernatorial elections as an instrumental variable to identify a causal effect of police on crime. Past studies had been inconclusive because of the simultaneity inherent in police hiring (when crime increases, more police are hired to combat crime). The findings of this paper were found to be the result of a programming error. This was pointed out in a comment by Justin McCrary published in the American Economic Review in 2002.[8] In a response published with McCrary's comment Levitt admits to the error and then goes on to offer alternative evidence to support his original conclusions.[9]

LoJack[edit]

Ayres and Levitt (1998) use a new dataset on the prevalence of LoJack automobile anti-theft devices to estimate the social externality associated with its use. They find that the marginal social benefit of Lojack is fifteen times greater than the marginal social cost in high crime areas, but that those who install LoJack obtain less than ten percent of the total social benefits.

Criminal Age[edit]

Another 1998 paper finds that juvenile criminals are at least as responsive to criminal sanctions as adults. Sharp drops in crime at the age of maturity suggest that deterrence plays an important role in the decision to commit a crime.

Finances of a drug gang[edit]

Levitt and Sudhir Alladi Venkatesh (2000) analyze a unique dataset which details the financial activities of a drug-selling street gang. They find that wage earnings in the gang are somewhat higher than legal market alternatives, but do not offset the increased risks associated with selling drugs. They suggest that the prospect of high future earnings is the primary economic motivation for being in a gang.

Link between drunk driving and accident rates[edit]

Levitt and Porter (2001) find that drivers with alcohol in their blood are seven times more likely to cause a fatal crash than a sober driver (those above the legal limit are 13 times more likely than a sober driver). They estimate that the externality per mile driven by a drunk driver is at least thirty cents which implies that the proper fine to internalize this cost is roughly $8,000.

Cheating in sumo wrestling and by teachers in schools[edit]

Duggan and Levitt (2002) show how nonlinear payoff schemes establish incentives for corruption and the authors use the nonlinearity to provide substantial statistical evidence that cheating is taking place in Japanese sumo wrestling. Brian and Levitt (2003) developed an algorithm to detect teachers who cheat for their students on standardized tests. They find that the observed frequency of cheating appears to respond strongly to relatively minor changes in incentives.

Politics[edit]

Levitt's work on politics includes papers on the effects of campaign spending, on the median voter theorem, and on the effects of federal spending.

Levitt's 1994 paper on campaign spending employs a unique identification strategy to control for the quality of each candidate (which in previous work had led to an overstatement of the true effect). It concludes that campaign spending has a very small impact on election outcomes, regardless of who does the spending. On the subject of federal spending and elections, previous empirical studies were not able to establish that members of Congress are rewarded by the electorate for bringing federal dollars to their district because of omitted variables bias. Levitt and Snyder (1997) employ an instrument which circumvents this problem and finds evidence that federal spending benefits congressional incumbents; they find that an additional $100 per capita spending is worth as much as 2 percent of the popular vote.

The 1996 paper on the median voter theorem develops a methodology for consistently estimating the relative weights in a senator's utility function and casts doubt on the median voter theorem, finding that the senator's own ideology is the primary determinant of roll-call voting patterns.

Other studies[edit]

  • Testing Mixed-Strategy Equilibria When Players Are Heterogeneous: The Case of Penalty Kicks in Soccer (2002): Chiappori, Levitt, and Groseclose use penalty kicks from soccer games to test the idea of mixed strategies, a concept important to game theory. They do not reject the hypothesis that players choose their strategies optimally.
  • Causes and consequences of distinctively black names (2004): Fryer and Levitt find that the rise in distinctively black names took place in the early 1970s. While previous studies found having a black name harmful, they conclude that having a distinctively black name is primarily a consequence rather than a cause of poverty and segregation.
  • Discrimination in game shows (2004): Levitt uses contestant voting behavior on the US version of the television show Weakest Link to distinguish between taste-based and information-based theories of discrimination. Levitt found no discrimination against females or blacks, while finding taste-based discrimination against the old and information-based discrimination against Hispanics.

Controversy[edit]

Defamation suit[edit]

On April 10, 2006, John Lott filed suit[10] for defamation against Steven Levitt and HarperCollins Publishers over the book Freakonomics and against Levitt over a series of emails to John McCall. In the book Freakonomics, Levitt and coauthor Stephen J. Dubner claimed that the results of Lott's research in More Guns, Less Crime had not been replicated by other academics. In the emails to economist John McCall, who had pointed to a number of papers in different academic publications that had replicated Lott's work, Levitt wrote that the work by authors supporting Lott in a special 2001 issue of the Journal of Law and Economics had not been peer reviewed, alleged that Lott had paid the University of Chicago Press to publish the papers, and that papers with results opposite of Lott's had been blocked from publication in that issue.[11]

A federal judge found that Levitt's replication claim in Freakonomics was not defamation but found merit in Lott's complaint over the email claims.[12]

Levitt settled the second defamation claim by admitting in a letter to John McCall that he himself was a peer reviewer in the 2001 issue of the Journal of Law and Economics, that Lott had not engaged in bribery (paying for extra costs of printing and postage for a conference issue is customary), and that he knew that "scholars with varying opinions" (including Levitt himself) had been invited to participate.[13][14] The Chronicle of Higher Education characterized Levitt's letter as offering "a doozy of a concession."[15]

The dismissal of the first half of Lott's suit was unanimously upheld by The United States Court of Appeals for the Seventh Circuit on February 11, 2009.[16]

Stetson Kennedy[edit]

Levitt drew criticism for writing an article called "Hoodwinked?", a follow up to the chapter "The Ku Klux Klan and Real Estate Agents" in his and co-author Stephen Dubner's 2005 book Freakonomics. The chapter compares the two as having power derived from secret information. It goes on to detail how Stetson Kennedy infiltrated the KKK and disseminated its secrets, effectively stripping it of much of its power. In 2006 Dubner and Levitt co-authored an article in the New York Times reporting that some of author Stetson Kennedy's accounts were embellished and his 1942 book The Klan Unmasked did not meet journalistic standards.[17]

Quotations[edit]

  • "Regression analysis is more art than science."[18]
  • "An expert doesn't so much argue the various sides of an issue as plant his flag firmly on one side. That's because an expert whose argument reeks of restraint or nuance often doesn't get much attention. An expert must be bold if he hopes to alchemize his homespun theory into conventional wisdom."[19]
  • "....if you own a gun and have a swimming pool in the yard, the swimming pool is almost 100 times more likely to kill a child than the gun is."[20]
  • "Of course, ocean acidification is an important issue. Now, there are ways to deal with ocean acidification, right, it's actually, that's actually, we know exactly how to un-acidifiy the oceans, is to pour a bunch of base into it, so, so if that turns out to be an incredibly big problem, then we can deal with that."[21]
  • "That's the nature of modern business—to be inundated with data. Your people don't have the time to analyze it, or the specialized training, but we do. There is nothing we love more than finding things in data that no one else can see."[22]

Selected bibliography[edit]

Academic publications (in chronological order)[edit]

Other publications[edit]

See also[edit]

References[edit]

  1. ^ Time Magazine's "100 People Who Shape Our World"
  2. ^ "'Freakonomics': Musings of a 'Rogue Economist' : NPR". 
  3. ^ John J. Donohue III & Stephen D. Levitt (2004). "Further Evidence that Legalized Abortion Lowered Crime: A Reply to Joyce" (pdf). The Journal of Human Resources. Retrieved 2008-12-03. 
  4. ^ Christopher L. Foote & Christopher F. Goetz (2008-01-31). "The Impact of Legalized Abortion on Crime: Comment" (pdf). Federal Reserve Bank of Boston. Retrieved 2008-05-12. 
  5. ^ "Abortion, Crime, and Econometrics". The Economist. 2005-12-01. Retrieved 2008-05-12. 
  6. ^ John J. Donohue III & Stephen D. Levitt (January 2006). "Measurement Error, Legalized Abortion, the Decline in Crime: A Response to Foote and Goetz" (pdf). Retrieved 2008-12-03. 
  7. ^ "The Effect of Prison Population Size on Crime Rates: Evidence from Prison Overcrowding Litigation", abstract: "A one-prisoner reduction is associated with an increase of fifteen Index I crimes per year."
  8. ^ Justin McCrary, "Do Electoral Cycles in Police Hiring Really Help us Estimate the Effect of Police on Crime?" Comment AER, 2002, 92 (4), pp. 1236–43.
  9. ^ Steven D. Levitt, "Using Electoral Cycles in Police Hiring to Estimate the Effects of Police on Crime: Reply" AER, 2002, 92 (4), pp. 1244–50.
  10. ^ PDF of Lott's complaint v. Levitt
  11. ^ Higgins, Michael (2006-04-11). "Best-seller leads scholar to file lawsuit; Defamation allegation targets U. of C. author". Chicago Tribune. p. 3. 
  12. ^ "Judge Castillo issues decision on Lott v. Levitt" on John Lott's website
  13. ^ Glenn, David (2007-08-10). "Dueling Economists Reach Settlement in Defamation Lawsuit". Chronicle of Higher Education 53 (49): 10. 
  14. ^ "Unusual Agreement Means Settlement May Be Near in 'Lott v. Levitt,' July 27, 2007"
  15. ^ "Unusual Agreement Means Settlement May Be Near in 'Lott v. Levitt'," Chronicle of Higher Education, July 27, 2007
  16. ^ "7th Circuit Affirmation of District Court Dismissal of Defamation Lawsuit"
  17. ^ http://www.nytimes.com/2006/01/08/magazine/08wwln_freakonomics.html?pagewanted=all
  18. ^ Steven Levitt with Stephen Dubner, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, William Morrow, 2005, p.163.
  19. ^ Levitt and Dubner, Freakonomics, p. 148.
  20. ^ Steve Levitt, "Pools more dangerous than guns", op-ed, Chicago Sun-Times, July 28, 2001.
  21. ^ interview about Super Freakonomics on Diane Rehm Show, WAMU, 26 Oct 2009, 11:00am.
  22. ^ Direct quote by Steven Levitt, Greatest Good company brochure, 2011.

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Press[edit]