Steven Levitt

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Steven Levitt

Steven Levitt (born May 29, 1967) is prominent American economist best known for his work on crime, in particular on the link between legalized abortion and crime rates. Winner of the 2003 John Bates Clark Medal, he is currently the Alvin H. Baum Professor of Economics at the University of Chicago and the director of the Becker Center on Chicago Price Theory at the University of Chicago Graduate School of Business. He is one of the most well known economists amongst laymen, having 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]

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[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 Alvin H. Baum Professor in 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 between gang members. In his most well-known and controversial paper (The Impact of Legalized Abortion on Crime (2001), co-authored with John Donohue), he demonstrates from statistics that the legalization of abortion in the US was followed approximately sixteen 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 so the legalization of abortion caused a reduction in crime. (See Legalized abortion and crime effect.)

[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

Donohue and Levitt (2001) (The Impact of Legalized Abortion on Crime) offers evidence 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 November 2005, two Federal Reserve Bank of Boston economists published a working paper (Foote and Goetz 2005 [3]) which argued that the results in Donohue and Levitt's abortion and crime paper were due to statistical errors by the authors - in particular the omission of certain statistical controls that Donohue and Levitt had claimed to have used and using the total number of arrests and not the arrest rate in explaining changes in the crime rate. 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."[4] Theodore Joyce had previously criticised the results in 2003 ("Did Legalized Abortion Lower Crime?" Journal of Human Resources, 2003, 38(1), pp. 1 -37.) Donohue and Levitt have responded to both criticisms: they can be found here (Foote/Goetz reply) and here (Joyce reply). See Legalized abortion and crime effect.

[edit] Prison population

Levitt's 1996 paper on prison population uses prison overcrowding legislation 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 criticized in a comment by Justin McCrary published in the American Economic Review ("Do Electoral Cycles in Police Hiring Really Help us Estimate the Effect of Police on Crime? Comment" AER, 2002, 92(4), pp. 1236-43). In a 2002 published response, Levitt admits to a programming error in the original paper and then goes on to provide additional evidence that suggests that increasing the number of police decreases the amount of crime.

[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. 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 majority 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] Other work

Other work by Levitt includes examinations of the finances of a drug gang, of the link between drunk driving and accident rates, and cheating in sumo wrestling and by teachers in schools.

[edit] Finances of a drug gang

Levitt and Venkatesh (2000) analyzes 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) develops 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] Selected works (in chronological order)

[edit] Other selected works

[edit] See also

[edit] External links

[edit] Press

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