Wide Angle 43 - SuperFreakonomics

Most of the educated but “non-Chetan Bhagat” reading junta has heard of the book “Freakonomics”. At least I have heard a few talk about it i.e. how it is cool and that they plan to read it someday. This Wide Angle is meant to introduce you to the Freakonomics series by a quick delve into the second part of the series “SuperFreakonomics” which I read last week. I hope to arouse your curiosity enough to have you all pick up the books and read them. The books are not only enlightening, they are highly entertaining as well. For those of you have read it, hope you enjoyed it.
The Freakonomics (FS) series is a product of thought of Stephen Levitt who is an economist at the University of Chicago. He is famous in the Economists’ world as a “rogue” economist. The reason is that since the day he gave his first dissertation, he has produced work which does not have any “unifying theme”. Economists typically weave their discourse around a theme or a theory and tend to stand for an idea or a collection of ideas that drive their narrative. Levitt has no such theme. Stephen Dubner is a journalist for the New York Times who got interested in Levitt’s work and wrote columns about him. The two got together and wrote down a collection of the theories all completely unrelated to each other and produced the book called “Freakonomics”. Their publisher was very sceptical about printing it but when published the book was a runaway success and made FS a household name.
A quick glance into FS before we move to today’s topic i.e. SuperFreakonomics (SFS). The opening story of FS sets the tone for the interesting reading that is the two books. It is an “a-ha” moment for whoever reads it. Basically, there was a path breaking case in the US called Roe vs Wade that was ruled on by the Supreme Court in 1973. The court basically settled in favour of women’s right to abortion thus paving the way for removing the restrictions put by many states on abortion. The story then moves to the state of crime in the US which was very bad through the 70s and 80s with everyone predicting the demise of society if the rate of crime increased that way. Suddenly, after the mid 90s, the crime rate dropped significantly. Experts were puzzled with this and started figuring out why this was so – different reasons were put out – increased prosperity due to the economic boom, increased policing, educational incentives but nothing could entirely explain the crime rate drop. What FS proposed was simple – after Roe vs Wade, many poor girls who would have to give birth to unwanted kids who they could not support adequately could now abort them. That meant less kids growing up in poverty and thus lesser criminals. Essentially – the kids who would eventually turn criminals were just not born. Simple but amazing.
SFS is an extension on the FS book. They talk about completely unrelated things but each very interesting and complete in its own way. The chapters are “How is a street prostitute like a department-store Santa”, “Why should suicide bombers buy life insurance?”, “Unbelievable stories about apathy and altruism”, “The fix is in – and it’s cheap and simple”, “What Al Gore and Mount Pinatubo have in common?” and the epilogue “Monkeys are people too”. I will write few lines about what is in each chapter and leave it that – you all can read the book for more.

Chapter on Prostitutes:
The message here is about the economics of prostitution. Street prostitutes are poor, addicts and vulnerable to arrests and violence from customers. About 100 years ago, there was a famous brothel called the Everleigh Club in South Chicago which housed the priciest and most skilled prostitutes. The speciality of this place was that the women could be highly wise and well read, make wine, give massages and did anything in bed. The Everleigh club was extremely successfully and popular for many years until it was closed down under political pressure for “moral” reasons. The wages of prostitutes that were so high suddenly dropped after the World War 2 primarily because of women’s lib as per the book. The sex that was so rare before which drove people to prostitutes and made them pricey started to be freely available from girlfriends that made the market a buyer’s market. However, on the one hand where there are street prostitutes, SFS tells the story of a very successful prostitute called Allie who quit a corporate job to start this one woman business and over the years discovered that she could up her price from $350 to $550 in one week and still keep her clientele but work less. She finally quit after making lot of money and went into real estate during the boom of 2007. After the bust of the market, she is studying to become an economist due to the first hand practical experience she has got.

Chapter on suicide bombers:
Amongst many things about suicide bombers, an economist called K.Anders Ericsson is helping authorities trace down terrorists based on data on banking and financial transactions. For example, a terrorist who plans to commit suicide bombing does not buy life insurance because insurance companies don’t pay for suicidal deaths. The modelling that Ericsson has put in place has narrowed suspects down to fraction percent points of the data size and it keeps getting better. One interesting fact is at the beginning of the chapter where they write about babies in Southeastern Uganda who if born in May next year would be likely to have visual, hearing or learning disabilities as adults. Three years from now, May would be safe, but the problem would be in April. The same pattern has been identified in Michigan, USA, a baby born in Michigan might carry a greater risk with a May birth than in Uganda – the reason is simple – the month of Ramadan. According to the study, babies that are in utero during the month of Ramadan have greater possibility of these disabilities, why Michigan – because it has a significantly high Muslim population and has longer days during summer than Uganda.

Chapter on Apathy and Altruism:
This chapter talks on the much talked about altruistic tendencies of human beings. Studies conducted with various combinations like having two players and one having to pay another under different circumstances and incentives produce fascinating results that confirm that human beings are naturally altruistic. There was however a rogue economist named John List who overturned Nobel winning studies proving altruism by demonstrating that when conducted unsupervised, the same experiments produced opposite results. People were much more selfish when they knew no one was watching them i.e. they tailored their behaviour to altruism subconsciously when they knew the experiment was being monitored.

Cheap and simple fixes:
This is one of the most interesting chapters, confirms my beliefs as well. The solution to extremely unsolvable and difficult problems is very cheap and simple. During the mid nineteenth century, there was a prevalent disease in the European hospitals called puerperal fever, perfectly healthy women came in for delivery and died within hours with a strange fever. This disease ranged across class and health divide. Interestingly, women who delivered at home never caught the disease. The reason was found by Dr. Semmelweiss who figured out that the germs of the disease originated in dead bodies and the doctors who worked on dead bodies before the delivery transmitted them to the mothers who had no resistance against them. The cure was simple – doctors had to wash their hands with disinfectant before going for the delivery. Another instance is about deaths that happened in the US in the 1950s because of accidents involving motorists. The problem was so huge that there were campaigns against owning cars till the time Robert Macnamara (who later became the Secretary of State during the Vietnam war and was responsible for escalating it) found a simple solution that solved the problem – the seat belt.
The authors suggest a simple solution for checking the devastating hurricanes that visit Florida and the South of US before summers. These happen because of the surface of the sea getting heated up and causing convective currents in the air that causes turbulence and thus creates a hurricane. Once created, the hurricanes cannot be stopped. The solution designed by a scientist Nathan and his friends is simple – a big cylindrical ring that would simply push the warm water below and make the cold water rise up this cooling the surface down and not letting the hurricane develop at all. The most expensive such float would cost only $100,000. No one has bought and implemented this yet but they are hoping that they would.

Chapter on Al Gore:
Similar to the previous chapter, a small company called Intellectual Ventures (IV) has devised a simple solution for Global Warming which is extremely outrageous so no one will implement it. It is basically global cooling. Mount Pinatubo erupted in 1991 and scientists observed that the temperature world over went down by a couple of degrees. The point is that big volcanoes push huge amounts of sulphur dioxide (SO2) into the stratosphere. Instead of quickly returning to earth there, the sulphur dioxide absorbs stratospheric water vapour and forms an aerosol cloud that circulates rapidly, blanketing most of the globe. This if done on a large scale would decrease ozone, diffuse sunlight and produce a drop in global temperature.
IV’s idea is to create a huge pipe that would reach the stratosphere supported by strategically placed balloons at different heights that would pump SO2 at the poles where most of the warming hurts thus cooling that area. Revolutionary idea which if tried out could transform the world – of course, no one will.

Monkeys are people too:
This is the final chapter and also very interesting. Two Harvard economists Keith Chen and Venkat Laxminarayan devised an experiment through which they induced commerce in monkeys called capuchins. They were taught to value a set of chips which brought them bananas or a treat. Pretty soon, the capuchins had learnt that this was something to hold on to and thus started taking rational decisions example opting for good behaviour if it won them the chips. After a while, the female capuchin in the group exchanged sex with a male when the male offered her a couple of chips. The experiment was stopped by the authorities because they feared that introducing money to the primates might damage their social structure – weren’t they right.

This article is kind of disjointed and maybe boring but the theory of FS is about finding and applying economics to normal life and trying to understand it better too. I strongly suggest you read these books – they are very good fun.