Steven Levitt


Steven David Levitt is an American economist and co-author of the best-selling book Freakonomics and its sequels. Levitt was the winner of the 2003 John Bates Clark Medal for his work in the field of crime, and is currently the William B. Ogden Distinguished Service Professor of Economics at the University of Chicago as well as the Faculty Director and Co-Founder of the Center for Radical Innovation for Social Change at the University of Chicago. He was co-editor of the Journal of Political Economy published by the University of Chicago Press until December 2007. In 2009, Levitt co-founded TGG Group, a business and philanthropy consulting company. He was chosen as one of Time magazine's "100 People Who Shape Our World" in 2006. A 2011 survey of economics professors named Levitt their fourth favorite living economist under the age of 60, after Paul Krugman, Greg Mankiw and Daron Acemoglu.

Career

Levitt was born to a Jewish family in 1967, and attended St. Paul Academy and Summit School in St. Paul, Minnesota. He graduated from Harvard University in 1989 with his AB in economics summa cum laude, and then worked as a consultant at Corporate Decisions, Inc. in Boston advising Fortune 500 companies. He received his PhD 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, which became a New York Times bestseller. Levitt and Dubner also started a blog devoted to Freakonomics.

Work

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 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, he shows that the legalization of abortion in the US in 1973 was followed approximately eighteen years later by a considerable 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

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

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 argued 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.

In 2003, Theodore Joyce argued that legalized abortion had little impact on crime, contradicting Donohue and Levitt's results. In 2004, the authors published a response, 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, 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." In January 2006, Donohue and Levitt published a response, 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. Foote and Goetz, however, soon produced a rebuttal of their own and showed that even after analyzing the data using the methods that Levitt and Donohue recommend, the data do not show a positive correlation between abortion rates and crime rates. They point out that this does not necessarily disprove Levitt's thesis, however, and emphasize that with data this messy and incomplete, it is in all likelihood not even possible to prove or disprove Donohue and Levitt's conclusion.

Prison population

Levitt's 1996 paper on prison population uses prison overcrowding litigation to estimate that decreasing the prison population by one person is associated with an increase of fifteen Index I crimes per year.

Police hiring

In a 1997 paper on the effect of police hiring on crime rates, Levitt used 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. 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. 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.

LoJack

Ayres and Levitt used 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

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

Levitt and Sudhir Alladi Venkatesh analyzed a unique dataset which details the financial activities of a drug-selling street gang. They found that wage earnings in the gang were somewhat higher than legal market alternatives, but did not offset the increased risks associated with selling drugs. They suggested that the prospect of high future earnings is the primary economic motivation for being in a gang.

Link between drunk driving and accident rates

Levitt and Porter found that drivers with alcohol in their blood are seven times more likely to cause a fatal crash than sober drivers. 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

Duggan and Levitt showed how non-linear payoff schemes establish incentives for corruption and the authors used the non-linearity to provide substantial statistical evidence that cheating is taking place in Japanese sumo wrestling. Brian Jacob and Levitt developed an algorithm to detect teachers who cheat for their students on standardized tests. They found that the observed frequency of cheating appears to respond strongly to relatively minor changes in incentives.

Politics

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. 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 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

Defamation suit

On April 10, 2006, John Lott filed suit for defamation against Steven Levitt and HarperCollins Publishers over the book Freakonomics and against Levitt over a series of emails to retired economist John B. McCall. In the book Freakonomics, Levitt and coauthor Stephen J. Dubner argued that the results of Lott's research in More Guns, Less Crime had not been replicated by other academics. In the emails to 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.
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.
Levitt settled the second defamation claim by admitting in a letter to John B. 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, and that he knew that "scholars with varying opinions" had been invited to participate. The Chronicle of Higher Education characterized Levitt's letter as offering "a doozy of a concession."
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.

Stetson Kennedy

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 compared the two as having power derived from secret information. It goes on to detail how author 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 Kennedy's accounts were embellished, and his 1942 book The Klan Unmasked did not meet journalistic standards.

Selected bibliography

Academic publications (in chronological order)