Steve Levitt, University of Chicago economist and author of the #1 bestseller “Freakonomics” and now a sequel, “SuperFreaknonomics”, is an American wunderkind. A few years ago, he won the John Bates Clark Award for the brightest economist under the age of 40. Another bestselling author Malcolm Gladwell (“The Tipping Point”) says that Levitt "has the most interesting mind in America.”
In his books, Levitt has uncovered some fascinating curiosities, such as: a backyard swimming pool is much more dangerous than owning a gun….Chemotherapy only extends the life of old people by only an average two months…..Cable TV has increased the crime rate in America….
In general, Levitt is upbeat about the power of economic analysis to solve problems. Despite facing the worst financial crisis since the Great Depression, we have “the tools to unlock the secrets of the world,” he told me. His books deal with novel ways to solve such diverse problems as hurricanes, global warming, corruption (even in Chicago!), crime, and inflation.
But while Levitt is optimistic about the ability to solve the world’s problems, he is not impressed with what is happening in Washington right now.
I asked him about a variety of issues before Congress right now. For an economist not known for his political biases, he came out swinging.
On the healthcare bill: “Central planning of any kind is bad. It won’t solve the problem, and in fact, will make it worse. Any government program that ignores the fundamental importance of marginal pricing is bound to fail.”
Financial crisis: “The government blew the crisis way out of proportion. It was crazy the way people panicked. This is not the end of capitalism by any means. The Federal government over reacted to the crisis and ran up monstrous deficits. Now we’re paying the price."
Banks and financial institutions “too big to fail”: “A huge mistake, the worst by far because it hurts smaller competitors. This is a real problem.”
Flat tax idea: “I like it. We need to make the world simpler, and do away with all the special exemptions such as deductions for mortgages, employer health care, etc., and substitute one simple flat income tax rate.”
His latest book, “SuperFreakonomics,” argues that self-interest is much stronger than people think, even when it comes to donating to charities and other altruistic causes. Even people who give anonymously might be doing so for selfish reasons, to keep their name off fundraising lists.
I asked him, “Does that mean you are a fan of Ayn Rand and her philosophy of selfishness?”
“No,” he responded. “I’m more a fan of Adam Smith.” Adam Smith actually taught that commerce and trade moderates the passions of greed and selfishness, and encourages tradesmen to respond to the needs of others without engaging in fraud and deception. At the same time, he wrote, “I have never known much good done by those who affected to trade for the public good.”
As I left, I noticed a copy of Reason magazine on his desk. “Are you a subscriber?” I asked.
“They send it to me for free. But I do read the magazine from time to time and find it valuable.”
Maybe it’s time we brought Steve Levitt to Washington to head up Obama’s National Economic Council.