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July 16, 2007, 6:00 a.m.
Whole Lott of Freedom
A marketable defense of free markets.
By Michael J. New
There exists no shortage of excellent books by conservative and libertarian authors extolling the virtues of free markets. These include classics like Milton Friedman’s Capitalism and Freedom, Henry Hazlitt’s Economics in One Easy Lesson, and Thomas Sowell’s Basic Economics. Despite this plethora of books, John Lott’s Freedomnomics is a welcome addition to this genre. Throughout the book, Lott successfully engages a number of current political debates and succeeds in making a number of cogent and well researched arguments in favor of free markets.
Indeed, times have changed since the release of many of these free-market classics. Nowadays few people openly advocate for collectivism or socialism. However, a number popular books about economics, most notably Steven Levitt and Stephen Dubner’s Freakonomics, often leave the reader with the distinct impression that market forces often result in unfair, bizarre, or nonsensical outcomes.
However, in Freedomnomics, Lott is able to debunk many common myths and demonstrates that markets often work better than anticipated. For instance, by analyzing used car prices, Lott is able to refute the notion that the value of new car plummets by 15 percent the moment it is purchased. Similarly, car manufacturers have declined to install the Lojack anti-theft device, not due to a public-goods problem, but because empirical research indicates that these devices are ineffective at retrieving stolen vehicles.
Indeed, throughout the book Lott is able to demonstrate that many problems of market failure can often be better solved through human ingenuity instead of government. Now Lott does concede that some market failures do require government intervention. However, Lott also discusses “government failure” and argues that government should be used sparingly. Decisions about the use of government power are often driven by political expedience rather than good policy. Furthermore, giving the state the ability to solve problems of market failure may lead the state to intervene in other ways that are socially harmful.
In some respects the book would have been even stronger if Lott would have spent more time discussing market failure. He spends time on monopolies, externalities and public goods. However, if he would have talked about the other common forms of market failure including transaction costs and imperfect information, the book would be potentially more useful to students and faculty.
Still, Lott’s most useful contribution is his description of his research. Especially notable is his critique of Steven Levitt’s work which argues that legalization of abortion led to crime reductions. Levitt’s research has received precious little serious scrutiny from the mainstream media. However, Lott identifies a couple key flaws. First, Lott documents that abortion was widespread in some states where it was legally restricted. Levitt fails to account for this. More importantly, Lott describes how the Roe v. Wade decision actually resulted in more out of wedlock births. This is because after Roe, single men felt less obligated to marry women they impregnated. Since children born out of wedlock are more likely to engage in criminal behavior, Lott argues that legalized abortion resulted in even more crime.
Indeed, the reader can learn a great deal from this analysis and from Lott’s other academic work. Throughout Freedomnomics, Lott ably demonstrates his skill as a researcher. He rigorously makes use of a variety of natural experiments to help distinguish between correlation and causality. He skillfully presents his work on a number of topics including gun control, campaign finance reform, government growth, crime, and voter fraud. Much of this work neatly demonstrates the efficiency of markets and the perils of government intervention. As a social scientist, I wish that Lott would have included an appendix to provide interested readers with more details about the technical aspects of his research.
Now Freedomomics is not without fault. There are times the book may seem a bit disorganized. Lott often zigzags between debunking the claims made in Freakonomics, detailing his own research, and making the case for free markets. Regardless, despite the methodological sophistication of his work, Lott is a clear and lucid writer. Overall, readers who are interested in market-based approaches to policy and cutting edge social science research will certainly find Freedomnomics an engaging read.
— Michael J. New is a visiting scholar at the Cato Institute and an Assistant Professor at the University of Alabama. |
