Prepare to be second-guessed. That would have been useful advice for Steven Levitt, the University of Chicago economist and author of the smash-hit book "Freakonomics," which uses statistics to explore the hidden truths of everything from corruption in sumo wrestling to the dangers of owning a swimming pool. The book's neon-orange cover title advises readers to "prepare to be dazzled"...

The "Freakonomics" chapter on abortion grew out of statistical studies Mr. Levitt and a co-author, Yale Law School Prof. John Donohue, conducted on the subject. The theory: Unwanted children are more likely to become troubled adolescents, prone to crime and drug use, than are wanted children. When abortion was legalized in the 1970s, a whole generation of unwanted births were averted, leading to a drop in crime nearly two decades later when this phantom generation would have come of age.

The Boston Fed's Mr. Foote says he spotted a missing formula in the programming of Mr. Levitt's original research. He argues the programming oversight made it difficult to pick up other factors that might have influenced crime rates during the 1980s and 1990s, like the crack wave that waxed and waned during that period. He also argues that in producing the research, Mr. Levitt should have counted arrests on a per-capita basis. Instead, he counted overall arrests. After he adjusted for both factors, Mr. Foote says, the abortion effect disappeared.

"There are no statistical grounds for believing that the hypothetical youths who were aborted as fetuses would have been more likely to commit crimes had they reached maturity than the actual youths who developed from fetuses and carried to term," the authors assert in the report. Their work doesn't represent an official view of the Fed.

"Does this change my mind on the issue? Absolutely not," Mr. Levitt says.

Update... From reader Timothy Dreier :

I read Freakonomics, finally, on a plane about a month ago, and I can't say I was all that impressed. Firstly, I think any economics book you can read in under four hours probably glosses over many important issues. Secondly, I didn't find any of the observations particularly shocking. Sumo Wrestlers cheat when they can benefit from it? SHOCKING! Non-monetary incentives matter to low-level gang members? TELL ME MORE! These findings aren't exactly Earth-shattering: they're in line with the most basic observation in all of economics, incentives matter. The abortion thing struck me as, well, a little off for some reason but I couldn't put my finger on it exactly. I guess the whole line of argument seems post hoc ergo propter hoc. It makes a nice "just so" sort of story, but I absolutely doubt the causal inference. There's also the small fact that the abortion rate in the US has been declining for some time, really since a spike in the 70s.

I do think you are going to harsh on Levitt. He is not an ideologue, and has in fact done a lot of excellent work empirically proving the large effects of prisons and police on reducing crime; he has punctured other left-wing myths, such as US elections being for sale; and given empirical support for school choice.

Your reader thinks it’s obvious incentives matter. An easy statement to make, but most people today do not understand this. Levitt hasn’t only made statements; he has stringently showed how incentives matter. Making the public accept this would be a great service for free-market advocates (Robert H. Frank has in various columns claimed tax cuts do not matter since people don’t respond to incentives). And the jury is still out on his abortion story. Certainly it would be surprising if hundreds of thousands of abortions by poor African Americans would have no effect of crime.

And having won a Clark Medal doesn’t make you Krugman. Milton Friedman and Gary Becker won Clark Medals. I think you and other conservatives would be making a big mistake if you start going after a neutral, economically right leaning guy and drive him into the hands of the New York Times crowd. Okay, he has a tendency to go politically correct on TV, but who cares when the work he does is invaluable as right wing intellectual ammunition?

PS. Calling Levitt “arrogant” is also an overstatement. He is known in Chicago for his humility, despite his success.

Hey, Don Luskin mocked "his arrogant self-promotion" ---which is different than "calling Levitt arrogant".

Sadly, this is the kind of "reporting" that I have come to expect from the Times, substituting rumor and innuendo for fact. For example, Altman quotes Bill Niskanen as asserting the the CEA has less access now than when Bill was at the CEA twenty years earlier. There is no way that Bill can possibly know whether this is true (has he had access to Hubbard's, my, Rosen's, or Bernanke's meeting schedule?).

Altman should know that this assertion of fact is baseless and self-serving (it makes the person making the assertion seem more important). But Altman is happy to quote the claim because it is consistent with his preconceived notions of how this administration works.

On the issue of my previous views, Altman makes a common error. In the past, I have been critical of supply siders who say that tax cuts generate so much growth as to increase tax revenue. That is different than being critical of tax cuts. I believe that tax cuts increase growth and, therefore, are partly self-financing. I think it is overoptimistic to say they are fully self-financing. That is why spending restraint must go hand in hand with tax cuts. For some reason, some Times reporters think that being critical of one argument for tax cuts is to be critical of tax cuts themselves.

Altman is right on the issue of gasoline taxes: I have written that higher gasoline taxes, coupled with lower income taxes, would be a good trade-off. The article is here. That is a view I still hold. The President may not agree with me about this. That's okay: One does not have to share 100 percent of the President's views to be willing to serve as an adviser.

FYI, on a related matter, you might enjoy this recent article of mine which you can also find here as the top listed paper. See especially footnote 5, which discusses another example of "reporting" by the Times.

The currency market routinely confounds economists. A classic 1983 study by Richard Meese and Kenneth Rogoff, then both at the Federal Reserve, concluded that macroeconomic models could not explain a currency's direction of travel, let alone how far it would go. One would do just as well to assume that next month's exchange rate will be the same as this month's. After another 20 years of interrogation, the macroeconomic data has confessed little more of value. A new review of the evidence† finds that some models, in some periods, beat tossing a coin. But not by very much.

If traders can learn nothing from economists, can economists learn anything from traders? No, is the customary answer. Economists traditionally assume that everything worth knowing about a currency is known by everyone; and that anything new is quickly embodied in the price. They imagine the market governed by an auctioneer, who finds the price that will square everybody's bids and offers before any actual trading takes place. Economists study the auctioneer, not the traders.

After his visit to the trading desks, however, Mr Lyons decided that dealers merited closer examination. He and Martin Evans, of Georgetown University, are part of a wider effort to model the currency market from “the trenches”. We cannot understand how currencies behave, they argue, unless we study the thinking and behaviour of those who trade them.

the role of the council's [White House Council of Economic Advisors] chair can take on a decidedly political tilt. That much was clear when Professor [N. Gregory] Mankiw, the last chairman to serve for more than a few months, appeared before the Joint Economic Committee of Congress in February of last year.

At times Professor Mankiw, who has returned to Harvard, sounded more like Scott McClellan, the White House press secretary, than an economic adviser. "The president is very focused on putting people back to work, at creating jobs," he said. "The president has said that he wants to make the tax cuts permanent. He believes that is important for economic growth."

Once he even caught himself, but the result ended up the same: "The president has - we've worked with Congress in the past to extend unemployment benefits. The president will continue with Congress on that issue."

This is a beautiful example of how what the liberal media doesn't say is rhetorically more important than what it does. The superiority of the welfare state (driven by hand-outs) over the ownership society (driven by low tax burdens) is simply assumed as part of the fact background, an implicit and unquestioned platform on which subsequent analysis can be based. The subsequent analysis isn't important. What's rhetorically important is that the implicit fact platform is subliminally reinforced -- over, and over, and over.

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