Steven Levitt

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Steven D. Levitt
Born May 29, 1967 (1967-05-29) (age 41)
Nationality  United States
Fields Economics
Institutions University of Chicago
Alma mater Harvard University
Massachusetts Institute of Technology
Known for Freakonomics
Notable awards John Bates Clark Medal 2003

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, and co-editor of the Journal of Political Economy published by the University of Chicago Press. He co-authored the best-selling book Freakonomics (2005). Levitt was chosen as one of Time Magazine's "100 People Who Shape Our World" in 2006.[1]

Contents

[edit] Career

He attended St. Paul Academy and Summit School, graduated from Harvard University in 1989, and received his Ph.D. from MIT in 1994. He is currently the William B. Ogden Distinguished Service professor of Economics and the director of the The Becker Center on Price Theory at the University of Chicago. In 2003 he won the John Bates Clark Medal, awarded bi-annually 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).

[edit] 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 (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.

[edit] Crime

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

[edit] 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 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 variables bias.

In November 2005, two Federal Reserve Bank of Boston economists Christopher Foote and 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. 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.

[edit] Prison population

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

[edit] Police hiring

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[7]. 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[8].

[edit] LoJack

Ayres and Levitt (1998) use a new dataset on the prevalence of LoJack 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.

[edit] 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.

[edit] 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 (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.

[edit] Finances of a drug gang

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.

[edit] Link between drunk driving and accident rates

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 $8000.

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

Duggan and Levitt (2002) shows 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.

[edit] Other studies

  • 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.

[edit] Controversy

[edit] Defamation suit

On April 10, 2006, John Lott (another economist) filed suit[9] against Steven Levitt and HarperCollins Publishers for defamation. 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 a series of email communications to an economist, John McCall, who pointed to a number of papers in different academic publications that had replicated Lott's work, Levitt said that Lott's work in a special 2001 issue of the Journal of Law and Economics had not been peer reviewed, 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.[10]

A federal judge found that Levitt's claim in Freakonomics was not defamation,[11] but required that Levitt admit 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, and that he knew that "scholars with varying opinions" had been invited to participate.[12]

The suit is not yet complete, however; Lott has appealed the ruling regarding the Freakonomics passage, citing new evidence that the passage damaged him professionally.[12]

[edit] Quotes

  • "Regression analysis is more art than science."
  • "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." [13]
  • "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."
  • "I just don't know very much about the field of economics. I'm not good at math, I don't know a lot of econometrics, and I also don't know how to do theory."[14]

[edit] Selected bibliography

[edit] Academic publications (in chronological order)

[edit] Other publications

  • Freakonomics: A Rogue Economist Explores the Hidden Side of Everything William Morrow, May 2005 (with Stephen Dubner)

[edit] References

  1. ^ Time Magazine's "100 People Who Shape Our World"
  2. ^ "'Freakonomics': Musings of a 'Rogue Economist' : NPR". http://www.npr.org/templates/story/story.php?storyId=4583937. 
  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. http://pricetheory.uchicago.edu/levitt/Papers/DonohueLevittReply2004.pdf. Retrieved on 2008-12-3. 
  4. ^ Christopher L. Foote & Christopher F. Goetz (2008-01-31). "The Impact of Legalized Abortion on Crime: Comment" (pdf). Federal Reserve Bank of Boston. http://www.bos.frb.org/economic/wp/wp2005/wp0515.pdf. Retrieved on 2008-05-12. 
  5. ^ "Abortion, Crime, and Econometrics". The Economist. 2005-12-01. http://www.economist.com/finance/PrinterFriendly.cfm?story_id=5246700. Retrieved on 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). http://pricetheory.uchicago.edu/levitt/Papers/ResponseToFooteGoetz2006.pdf. Retrieved on 2008-12-3. 
  7. ^ 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.
  8. ^ 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.
  9. ^ PDF of Lott's complaint v. Levitt
  10. ^ Higgins, Michael (2006-04-11). "Best-seller leads scholar to file lawsuit; Defamation allegation targets U. of C. author". Chicago Tribune. p. 3. 
  11. ^ "Judge Castillo issues decision on Lott v. Levitt" on John Lott's website
  12. ^ a b Glenn, David (2007-08-10). "Dueling Economists Reach Settlement in Defamation Lawsuit". Chronicle of Higher Education 53 (49): 10. http://chronicle.com/daily/2007/07/2007073003n.htm. 
  13. ^ Levitt and Dubner, Freakonomics, p. 148.
  14. ^ Stephen J. Dubner, The Probability That a Real-Estate Agent Is Cheating You (and Other Riddles of Modern Life), The New York Times, August 3, 2003.

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[edit] Press

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