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Unconventional Wisdom

Calling someone a rock star economist may seem oxymoronic but it is one of the first descriptions that comes to mind when watching "Freakonomics" author Steve Levitt speak.

The University of Chicago economics professor drew a capacity crowd of a few hundred people at Wayne State's Community Arts Auditorium late last month, as he spoke about corruption, cheating, and crime and turning conventional wisdom on its head through economics. These are all subjects the Minneapolis native explores thoroughly in his blockbuster book and in his blog.

A graduate of Harvard, MIT and recent winner of the John Bates Clark Medal given to the nation's best economist under 40 years old, Levitt can speak about these subjects with authority. His stereotypical nerdy appearance also helps lend credence to his unorthodox theories — such as his view that legalized abortion lead to a drop in crime in the 1990s. Many of Levitt's insights into human nature and how it relates to economics can be found on another blog he writes for the New York Times. It was his engaging personality, ability to tell a story and talent for telling a joke that kept his Detroit audience enthralled and listening to his mantra: "If you want to think about behavior you first have to think about incentives."

Levitt's speech, which touched mostly on his book — co-written with Stephen J. Dubner and now in its 101st week on the New York Times Bestseller list  — and research, was met with enthusiastic applause, although his call for an end to teacher tenure drew only a tepid response. He related to Detroiters, noting that his first car was a Chevrolet Nova and how the Chicago White Sox's World Series win two years ago has ruined watching casual summer baseball games anywhere in practically empty stadium on Chicago's south side where he lives. ("Now you can't do it anymore. It's been a real disaster.")

When asked about Wayne State's recently released five-year strategic plan to turn itself into a premier research university and dynamic campus, Levitt says doing such things are more about incentives than plans. Wayne State, he says, should create a system filled with financial and social incentives "where people value what they're doing so they can call out people not doing well and be rewarded for doing their jobs well." After a lengthy question-and-answer session about his book and musings on Detroit, he sat down with reporters. 

Model D: Detroit came out with a study recently that showed the downtown area is safer by using normal crime statistics and including office workers and entertainment patrons as part of the population. What do you think of this type of method?

Levitt: I think that is exactly right. What you just described was when they do the official FBI statistics and they take the number of crimes divided by the number of people who reside in that area. Of course when you have areas frequented by people who don't live there you have a tremendous distortion to the reported crime rate. Studies have been published where casinos are associated with big increases in crime. But the people who wrote those studies didn't take into account the enormous influx of people. Detroit is an exception, but people tend to put casinos in relatively low-density places. So of course nobody lived there before. There was no crime. Very few people live there now. But an enormous string of people come through and with it the crime. What is true of Detroit and true for every city in America is that the gains in safety have been absolutely unbelievable. If you go back to a time in 1989 where the crack epidemic is raging and you said that crime would be down and homicides would be down 40 or 50 percent, no one would believe you. There is no way. Crime just goes up. Is it really possible in 15 to 20 years that crime would plunge as much as it did? Nobody would believe you. It's interesting, if you look in the newspapers all the focus lately is on tiny little up ticks in crime in certain places. If you read the headlines only in newspapers you would think we are descending into a period of the worst crime we have ever had. If you actually go look at the data, typically what you find is about half of the crimes are going down and half of the crimes are going up. Neither is going any place very fast. And yet the media will report only what is interesting to people or only what they think they want to hear or only what will sell newspapers, which is crime is going up. I think it's actually been a very irresponsible way of reporting in the national media on crime.

Model D: Do you have any pet peeves about data that is misused by politicians or journalists? 

Levitt: As I mentioned before, the way that people always try to blow up the crime problem. The standard way the data is misused is to distort it in a way that will allow your special interest to clamor for more resources and claim more credit. Not to focus too much on crime but it's what I know the most about. When crime started to fall, in every city the police would claim it’s the police. The people who ran the prisons claimed it was the prisons. The people who were interested in moral values would say it was changing moral values. The people who ran drug rehabilitation places said it was because of more drug rehab. The problem they had is when crime is falling in every city of America, it's hard to say the Detroit Police are responsible for that or the Michigan prison system. But nonetheless, when you read articles every time there is a report on crime going up or going down, you have pundits weighing in on exactly what local forces drove that even though it’s the same forces operating everywhere in America.

Model D: The city plans on using studies by Social Compact to help attract more retail development. What do you think of the Social Compact-type studies?

Levitt: I think that's interesting. I would think that if you have faith in business you gotta believe retailers would figure that out on their own. Starbucks must have. They have now put Starbucks in neighborhoods that they would have never put Starbucks in before. If there is one thing they should know is if they put a restaurant or a store in this neighborhood can it support it economically. It's more intriguing to me the thought that a city would have to explain to a retailer that the neighborhood could be able to support the retail. You could imagine the conventional wisdom at a retailer is, 'Ohhh… these are not neighborhoods we have ever been in. They're not ones that could support us.' It would fascinate me if a local government could teach retailers about their own business. I live on the South Side of Chicago where there are a lot of really poor neighborhoods but there are Starbucks everywhere. One of my colleagues had a rule which was he would live in any neighborhood that had a Starbucks because he figured they were better at picking good neighbors. I think in recent years he has changed his opinion because they have been putting Starbucks in places that he would be afraid to live in.

Jon Zemke is a regular contributor to Model D.



Photos:

Campus Martius

Freakonomics book detail courtesy of William Morrow/An Imprint of Harper Collins Publishers

Wayne State University

The People Mover

Steve Levitt courtesy of William Morrow/An Imprint of Harper Collins Publishers



All Photographs Copyright Dave Krieger except where noted


Read more articles by Jon Zemke.

Jon Zemke is a news editor with Model D and its sister publications, Metromode and Concentrate. He's also a small-scale real-estate developer and landlord in the greater downtown Detroit area.
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