John Lott's Freedomnomics

I was hoping to sell this as a book review somewhere, but I can't find any magazines that will publish anything by me anymore except Shotgun News, so....

Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don’t. John R. Lott. Regnery Publishing, 2006. 275 pp.

The cover art shows a slice of apple pie—with stars and stripes and an explanation, “A Rebuttal to Freakonomics and More”—thus explaining the “half-baked” in the subtitle. If you weren’t paying attention a couple of years ago, Freakonomics was a very successful popular book on economics. Dr. Lott’s book is a defense of free markets aimed at much the same audience—-people in the middle who aren’t quite sure what to think about how well free markets work. I rather doubt that people who are either strongly supportive or strongly hostile to free markets are going to have their minds changed by Freedomnomics—-but almost everyone will find some of the examples that Lott gives entertaining or thought-provoking.

Lott articulates how and why the free market behaves the way that it does. While this behavior may sometimes frustrate us as consumers, it nonetheless provides useful benefits to the society as a whole. Lott explains why hurricane Katrina drove up gasoline prices before it hit, as oil companies raised prices to reduce demand and enlarge gasoline inventories. After Katrina damaged Gulf of Mexico well platforms, pipelines, petroleum terminals, and refineries, those enlarged inventories helped keep prices from rising higher than they otherwise might. Oil companies didn’t do this because they were looking out for the benefit of consumers, or because the government told them to do so—but because they were trying to maximize profit. As Adam Smith observed about butchers, brewers, and bakers, we don’t get gasoline because oil companies are concerned for our needs, “but from their regard to their own interest." We might not like it, but self-interest is a far more certain motivator than benevolence.

Many of the most surprising sections of the book concern topics where economists have done statistical analyses to try and test particular hypotheses. As much as anyone else, I assume that campaign contributions have some significant influence on how legislators vote, but Lott provides an ingenious example of how he tested this problem, by studying the voting record of members of Congress who retired in 1978, and did not go on to other government service or lobbying. In their last term, without the pressure of raising money, they presumably were now free to vote their consciences without fear of reprisal—-and astonishingly, it had no effect (pp. 50-53).

The real problem of campaign contributions isn’t usually quid pro quo corruption (although Lott acknowledges that this happens too) but that special interests contribute money to people that genuinely share their beliefs. As Lott points out, “Politicians from Kansas really do think that farmers are the backbone of America. Those from Detroit really do want to help the car industry.” (p. 56) This is no surprise; a Silicon Valley candidate who didn’t see electronics as a vital American industry would not be able to raise enough money to defeat a candidate more in line with the values of big campaign contributors.

While most of Freedomnomics examined statistical work concerning interesting social problems, Lott sometimes gives examples from his personal experience, such as what happened when he involved himself in a Montana tax limitation initiative campaign in 1986. He soon learned that while it was perfectly okay for professors to involve themselves in the campaign against the initiative, the economics department at Montana State University was threatened with a cut in funding if they could not get Lott to shut up in support of the measure. Lott was younger and more naïve back then, “but I was surprised by the vehemence with which people who receive their income from taxes fought to protect that largesse.” (pp. 7-11)

In light of Lott’s highly publicized research into crime rates (More Guns, Less Crime, for example), it is unsurprising that he devotes an entire chapter to economics and crime. In particular, he points to inconsistencies and factual errors in the work by economists Donohue and Levitt that claims that Roe v. Wade (1973), by legalizing abortion, caused a dramatic decline in crime rates in the 1990s. Lott instead presents evidence that suggests that legalizing abortion, by reducing incentives for men and women to be careful, increased the number of illegitimate births—-and points out that children of single mothers are actually at higher risk of becoming criminals. Lott says that the decline in crime rates in the 1990s was in spite of legalizing abortion, not because of it. While I am not sure that I find his argument persuasive, he does demonstrate that Donohue and Levitt’s opposing claim is not a slam-dunk.

Perhaps the most startling claim that Lott makes is that women’s suffrage caused a dramatic increase in the size of government, because the “gender gap” reflects a genuine difference in how men and women—-especially single or divorced women—-see the appropriate role of government with respect to income security and education. He points to how state government expenditures changed in states as the percentage of women voting increased—and how the varying years in which different states granted women the vote confirms that this was not a coincidence.

Even if you don’t find every argument convincing, Freedomnomics will make you think about issues that you have never even considered before. Best of all, Freedomnomics is entertaining, crisp, and free of the sometimes off-putting statistical lingo that scholarly papers concerning economics necessarily employ.