Incentivization and the Superfreakanomics Controversy
Why Levitt and Dubner’s take on climate change is too limited a view
Posted 2009-12-26 12:40 in book reviews, environment, human nature, politics
In 2005, a pop economics book called Freakanomics climbed the nation’s bestseller list. Written by University of Chicago economics professor Steven Levitt and New York Times journalist Stephen Dubner, the book claimed to unlock mysteries surrounding many social phenomena. For example, chapters explained through the lens of statistics and economic theory, why drug dealers live with their parents and the reasons for the popularity of certain baby names to particular races of people. The explanations given in the book were interesting and thought-provoking, and earned a great deal of critical acclaim and popular press.1 Whatever the legitimacy of the claims made in the book, there was always a sense that Levitt was a sharp guy; he came from a respected academic institution, and was well-known in his field.
Earlier this year (2009), the highly-anticipated followup to their bestselling book, entitled Superfreakanomics, was released. But even before the book had hit shelves, a massive amount of public controversy had built up— much of it very negative. Many critics who had formerly been gushing about the authors suddenly had lost all respect, viewing the book as a compendium of contrarianism, arguments made to deliberately jostle one’s sense of intuition about things— in a bad way. For example, Levitt and Dubner argued that drunk-driving is safer than walking home drunk. Not only did this incense organizations that had made so many strides against this sort of behavior, but many found there to be surprisingly weak chains of logic in their methodological approaches.
But where the book really enraged the scientific community at large was in their highly controversial chapter on global warming. Climate change is already a hot-button topic; one that has generated a large level of heated public debate. Levitt and Dubner decided to throw gas on the flame by claiming that the only serious way to address the problem is to engage in geoengineering. We should, they argue, release large amounts of certain chemicals into the atmosphere; these chemicals will absorb the problems created by excess CO2 and begin a global cooling process. There’s a lot you could say about their “solution” in terms of the science (which they claim supports them, but which many strongly dispute); for starters, it’s dangerous to so offhandedly suggest a solution on this scale that could have serious downstream problems. Efforts in using human measures to balance biological processes have often had unforeseeable and difficult to correct consequences (one example being the recurring problems we have had with invasive species). But I’m not in the loop enough with that world to argue those points. What irks me is that they specifically downplayed the idea that change in human behavior was warranted or possible at all. In an interview, Levitt was quoted as saying:
If you look at the history of modern mankind, I think you will be hard pressed to find any particular problem that was serious that was solved by a behavioral change, as opposed to by a technological solution…
As a social scientist and student of economic behavior, I find this assertion not only misguided, but ill-conceived as well. First, it is built on a false premise: that there are two types of change, behavioral and technological. This is untrue; often, behavioral change goes hand in hand with technological change. How is it fair to say that our society’s transition to motor vehicles, or our adoption of cellular telephones are solely the purview of technological change? Sure there are clear technological changes involved, but simple shifts in technological wizardry do not, by themselves, account for widespread shifts in adoption rates (for example, natural gas vehicles have been invented, but few people actually own a natural gas powered car). For any technological advance to take root, it has to be accompanied by behavioral changes.
The second reason, which dovetails perfectly with the aforementioned reason, is that because people do make behavioral changes that aren’t part of technological changes. It’s not clear what serious historical events Levitt is talking about when he says that he doesn’t have confidence in people changing behavior, but there’s tremendous, almost incontrovertible evidence that behavioral change can happen in the absence of technological change. Here’s one simple example: high gas prices in 2007 drastically reduced the amount of driving done by the average American. This might seem like a trivial rebuttal, but the reality is that external conditions force people to change behavior all the time. Here, the fact that prices went up disincentivized people from driving around needlessly. Technology played no part in this. Admittedly, it can be argued that this is not a “serious” situation on the scale that Levitt is referring to in that quote, but aside from climate change, what serious situations of global proportions that involved 6 billion— or even 50 million— atomized individual actors has plagued this planet in the past? I can’t think of one. Regardless, it’s not hard to see that many situations, particularly ones involving imminent crises, effect rapid changes in human behavior. For Levitt— an economist— to make an argument asserting the pre-eminence of technology as a force is a little surprising to me.2
I don’t mean to discount the role of technology at all. But just as often, it comes down to our governments and society to create the conditions necessary for behavioral change. Sometimes this happens on its own, sometimes it happens through deliberate processes. Regardless, my argument against Levitt’s assertion is one that I thought should have been obvious to someone of Levitt’s stature; as an economist, his entire field is about incentivization. Surely he, of all people, would know that you can change behavior— not simply by asking for change, which is the straw man he seems to be knocking down— but by changing incentives structures and changing the conditions that push individuals towards the choices they make (perhaps he should have taken some lessons from his colleague at the University of Chicago Richard Thaler, whose book Nudge discusses this idea at length).
Though I can’t make any arguments about geoengineering because I simply don’t know enough about it, I will say that saying that Levitt and Dubner’s attitude towards behavioral change is somewhat defeatist and cynical; I agree, it can be difficult to change behavior, but it’s important to realize how it can and can’t be done. Simply asking for it doesn’t typically work, as people have resistance to change; but creating conditions that encourage behavioral change is exactly how the world and our society was able to transform so dramatically over the past few millennia, and how we can expect it to be shaped in the future.
1 I can’t say that I cared much for the book myself (again making myself the oddball amongst my peer set), mostly because the title was misleading and the book had no applied value whatsoever. It was fairly interesting if viewed as a trivia book, however— putting aside any questions regarding its accuracy.
2 Surprising at least initially, until I realized that mainstream economic theory didn’t even introduce concepts about the behavioral irrationality of the consumer until just a few years back. This shocking and bewildering oversight will eventually lay waste to the entire field if it is not immediately adopted into the economic mainstream. The field is already getting a lot of heat because of the recent economic meltdown, which was due in large part to irrational consumer processes that were not even considered by the big names in economics!
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