Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't

by John R. Lott Jr., Brian Emerson (Translation)

How free-market economies really work
(and why they work so well)

Are free market economies really based on fleecing the consumer? Is the U.S. economy truly just a giant free-for-all that encourages duplicity in our everyday transactions? Is everyone from corporate CEOs to your local car salesman really looking to make a buck at your expense?

In Why the Free Market Works and Other Half-Baked Theories Don't,

economist and bestselling author John R. Lott, Jr., answers these and other common economic questions, bravely confronting the profound distrust of the market that the bestselling book Freakonomics has helped to popularize. Using clear and hard-hitting examples, Lott shows how free markets liberate the best, most creative, and most generous aspects of our society--while efforts to constrain economic liberty, no matter

how well-intentioned, invariably lead to increased poverty and injustice. Extending

its rigorous economic analysis even further to our political and criminal justice

systems, Freedomnomics

? How the free market creates incentives for people to behave honestly

? How political campaign restrictions keep incumbents in power

? Why legalized abortion leads to family breakdown, which creates more crime

? Why affirmative action in police departments leads to higher crime rates

? How women's suffrage led to a massive increase in the size of government

· Why women become more conservative when they get married and more

liberal when they get divorced

? How secret ballots reduce voter participation

? Why state-owned companies and government agencies are much more likely to engage in unfair predation than are private firms

? Why the controversial assertions made in the trendy book Freakonomics are almost entirely wrong

Entertaining, persuasive, and based on dozens of economic studies spanning decades, Freedomnomics not only shows how free markets really work--but proves that, when it comes to promoting prosperity and economic justice, nothing works better.

Genres: Economics, Nonfiction, Politics, Business, Philosophy, Audiobook, Psychology

275 pages, Hardcover

First published January 1, 2007

About the author

John Richard Lott Jr. (born May 8, 1958) is an American economist and political commentator. Lott was formerly employed at various academic institutions including the University of Chicago, Yale University, the Wharton School of the University of Pennsylvania, and the University of Maryland, College Park, and at the American Enterprise Institute conservative think tank. He is currently a Fox News opinion contributor. He holds a Ph.D. in economics from UCLA.

Reviews

[Amora · Rating 4 out of 5]

When Freakonomics came out over a decade ago, it dealt a huge blow to supporters of free markets. Indeed, it helped spread the idea that real estate agents were out to defraud clients. As time went by, economists began to question the research behind the book. John Lott, an economist at the University of Chicago, debunks many of Freakonomics’ bold claims with new research. Lott also talks about other subjects such as gun control, abortion and crime, media bias, the 2000 Florida recount, campaign finance regulations, the death penalty, affirmative action, and punitive justice.

[BradMD · Rating 5 out of 5]

10/10. One of the great books on economics written for the lay public by John R. Lott Jr., PhD. Chapter 5 on election fraud is excellent. "Remarkably, it looks as if virtually all felons are Democrats." - p. 184. Leona Helmsley, Martha Stewart, and Michael Milken, were all convicted felons and Rich democrats.

[Meg - A Bookish Affair · Rating 1 out of 5]

This book was supposed to be a counter to "Freakonomics," a book which shows economics of various things other than the traditional monetary view that we usually pin economics to. To me, some of Lott's arguments seem half baked. He tries to put together things like abortion rate and crime rate later on in life. One thing to remember when reading this book is that coincidence does not breed causality.

[Angie · Rating 3 out of 5]

Scary! It's actually making me question or at least rethink my liberal views.

[Jim A · Rating 1 out of 5]

This book is hypocritical partisan trash. He starts by condemning the 'Freakonomics' authors for using an anecdote, then fills his own book with anecdotes. He rarely cites what data sets he uses for his statistics; only says a number and moves on without ever questioning why that particular statistic that supports his position may be flawed, but deep dives into any statistics that doesn't support his position from 'Freakonomics,' which cited where they got their data sets from. The majority of his alleged data comes from 40+ years ago, like nothing has changed since then. He made claims about particular gun safety statistics that don't even exist. I know because I've looked for them myself before I ever even read the book. No one keeps statistics or records of what he said he drew his conclusions from. He made other conclusions that, on first glance may be correct, but never goes into the complex socioeconomic reasons for those statistics, and never attempts to adjust the statistics based on those factors. Hands down, my FAVORITE part was when he made the claim "all felons are democrats," like a republican has never broken a law in the past 50 years. This author and book are a joke, and parrots (debunked) republican talking points like the GOP is paying his commission for the book.

[Ram · Rating 1 out of 5]

Why would this be a good book for those just learning to read? For one, the font is huge. Nothing, by the way, screams, "look at me! I'm a big, important work of academic mastery!" more than enormous font in a very short book. Those struggling to overcome illiteracy will also find this book agreeable because they won't have to take the time to comprehend as they decipher the big (I mean in height, not difficulty) words. Simply put, John Lott's arguments don't make much sense and he seems confused much of the time about this "free market" thing.

You'll love this book if you're a "bootstrap" conservative, though. Intellectually lazy, addle-brained ideologues will find nothing challenging here.

[Aaron · Rating 4 out of 5]

I liked this book and read it before I read Freakonomics. I thought it was written well, but retrospectively, not quite as well as Freakonomics. It seemed as though it was a little rushed to press as a rebuttal. While it was good, I think the editing and focus could have been better. I like the arguments presented in both books and compare and contrast.

[Lisa · Rating 4 out of 5]

The subtitle of this book indicated it would rebut the ideas in Freakanomics, a book I found very interesting. This book did challenge some of Freakanomics, but the most interesting parts did not.
The most important idea in this book had to do with campaign finance reform, a topic I find very frustrating. I am in favor of term limits for Congress for several reasons--one of the reasons is that the incumbent wins about 95% of the time because of the great financial advantage they have. It seems that the guy with the most money wins. There seems to be a vicious cycle of special interests donating campaign money, then the Congressman funnels money and/or considerations to that special interest group. McCain/Feingold was supposed to limit the amount of campaign donations, but it doesn't work because people just donate to PAC's. Lott pointed out the problem, its cause, and its solution. The problem is that government spending has sharply increased, drawing those special interest groups hoping for a piece of the pie. The answer--decrease government spending and all that goes with it. As our national debt just topped $12 trillion, I love that solution!!
I am an independent, and I found Lott's ideas on voting and felons gave me a really good laugh. First Lott said that people tend to vote for people like themselves. For instance, a black voter would identify with a black candidate and be more likely to vote for him. Later Lott discusses felons and the drive to reinstate their voting rights by Democrats. Lott said that he found that virtually all felons are Democrats. Here is the funny part, I concluded that felons look for the candidates most like themselves, and they chose Democrats. While the Republicans have corruption problems, the Democrats really need to clean up!
There's lots more interesting ideas in this book that supports free markets. Right now most people are spending more than they would like for gasoline, but we can always find it, fill up, pay, and move on. Those of you that remember the 1970's can picture the long lines at the pump and many gas stations posting signs that they were out of gas. Why? Because of price controls, gasoline prices were kept artificially low--but the shortages were severe!

[Evan · Rating 5 out of 5]

Nice book, but I feel kinda biased because I agree almost entirely with the author. He is correct, however, and he gave some amazing insights in stuff like voting issues and "election contribution corruption". On campaign contributions, the problems would all be solved if the government weren't so mammoth sized. Good book to read! (this review was written by a heavily biased believer in free market economics and personal freedom)

[Atchisson · Rating 5 out of 5]

While "Freakonomics" gets all the press, this book by John Lott spells out what REALLY goes on. If you want a fun take on he skewed perspective of "Freakonomics", this book offers it.

[Toe · Rating 4 out of 5]

Informative, well-written, short.

I like this guy. He tackles seemingly complex yet interesting social questions and analyzes them. He discusses the theory, then provides the numbers, then discusses why the theory does or does not jibe with the numbers.

The process involves applying simple, true concepts to reality. All the concepts boil down to cost-benefit analysis. People will do things more when those things have lower costs and higher benefits. They will do things less as the costs rise and the benefits fall. Being able to anticipate and tease out all of the costs and benefits is where the magic lies. Sometimes this process puts John Lott’s book in direct conflict with another interesting pop-econ book, Freakonomics.

For example, Freakonomics argued that legalized abortion in the United States, with the passage of the Supreme Court decision, Roe v. Wade, 410 U.S. 113 (1973), contributed to the decline in crime experienced in the 1990’s. Their reasoning was that people who had abortions were typically poor, uneducated, unemployed mothers. These women created environments that bred more criminals. But, by having abortions, these criminals were never born to grow up and commit their crimes. It’s basically like John Claude Van Damme in Timecop going back to off bad guys before they become bad guys. Sounded plausible to me when I read Freakonomics, which admittedly was long ago and prior to writing book reviews to remember the books I'v read. It also was not a new argument. There was study by Hans Forssman and Inga Thuwe published in 1966, Daniel Callahan’s 1970 book “Abortion, Law, Choice, and Morality,” and the 1972 Rockefeller Commission on Population and the American Future, which all said the same thing: abortion lowers crime.

John Lott says hold on. When abortion is legal, the costs of premarital and unprotected sex go down because it’s easier to rectify unwanted pregnancies. Precautions aren’t as necessary. Consequently, people will be more likely to have pre- and extramarital unprotected sex, which leads to more pregnancies. It also makes men feel more entitled to not care for their offspring since they may expect the woman to have an abortion. Hey, I wanted her to have an abortion, she didn’t, so she should have to take care of it. The question then becomes which occurs more frequently and thus has a bigger impact on crime: 1. people having abortions of potential future criminals or 2. women getting pregnant when they otherwise would not because of the abortion escape hatch, ultimately deciding against abortions, and placing children in the very environment that is more likely to result in criminal behavior? Lott says the latter occurs more frequently based on his and other studies. In fact, according to Lott, abortion increases the murder rate by about 7%. The two main pieces of evidence cited by Lott are that those born the four years after Roe were much more likely to commit murder than those born in the four years prior to Roe; and Canada, which didn’t legalize abortion nationwide until 1988, also had a similar decline in crime in the 1990’s.

This book is filled with such questions. Lott reaches conclusions based on the data as he interprets and analyzes it. His conclusions seem plausible to me. But so did those of the “Freakonomics” authors when I read that. So shit, I don’t know. Decide for yourself.

The following is a random list of Lott’s conclusions drawn from the data and based on the idea people respond to incentives.
• Very few, if any, people who draw their income from taxes will be inclined to support a reduction in taxes. Lott discusses a proposed reduction in Montana property taxes and how nearly all educators, from pre-K through university were against the proposal.
• In baseball, the American League has more hit batsmen than the National League, but this difference only appeared in 1973 when the American League removed its pitches from the batting lineup in favor of designated hitters. American League pitchers are less concerned about being directly retaliated against by the opposing team’s pitchers, so they throw more beanballs.
• In addition to legalized abortion, affirmative action hiring in the police force increased crime. Affirmative action hiring reduced the number of police officers capable of performing the essential job functions, which require a minimum level of cognitive and physical ability. Female police officers are more frequently incapable of pursuing and subduing male criminals. For example, Brian Nichols was 33-years-old, 196 pounds, and a rape defendant. In a courtroom, he was guarded by a 51-year-old, 5’2 woman. Nichols overpowered his guard; took her gun; and killed the judge, court reporter, a police officer, and a federal agent. But hey, at least there was increased diversity on the Atlanta police force.
• Lott attributes the decreased crime in the 1990’s to the death penalty, increased law enforcement (which is to say longer prison sentences and more arrests), and expanded right-to-carry laws. A study on the death penalty by Isaac Ehrlich in 1976 found that each execution deterred between 20-24 murders; later studies put the number at 15-18; but Lott says most of the studies agree that it is a deterrent. Lott says that during the 1990’s assault victims who used a gun for self-protection were injured 3.6% of the time, as opposed to 5.4% who ran or drove away, 12.6% who screamed, 13.6% of those who threatened the attacker without a weapon, and 55.2% of those who took no self-protective action at all!
• Demographic changes, gun control, and broken window policing did not really decrease crime in the 1990’s.
• There is a federal minimum wage law. If employers break it, they have to pay large fines. Employees have a large incentive to report employers who pay them less than the mandated minimum because employers are often forced to pay them double the amount of the underpayment. The longer the time goes on that an employee is paid less than required, the more the incentive builds for them to report their employer. This incentive does not apply, however, to illegal immigrants who risk deportation for bringing suit. Thus, in addition to pricing out unskilled labor, the federal minimum wage also encourages the hiring of illegal immigrants by employers.
• The U.S. federal government consumed about 2-3% of GDP up until WW1. The 19th Amendment, passed in 1920, gave women the vote. Spending by the federal government has grown ever since. Women are more risk averse and consequently more supportive of government programs to ensure against risks in life, such as Medicare, Social Security, education expenditures. Women typically have lower incomes. Single women are more supportive of progressive income taxes. Married women are less supportive of progressive income taxes.
• As you’ll recall, there was a big scandal during the 2000 presidential election in Florida because many ballots were cast as non-voted, i.e., the votes were not counted. Some attributed the cause to mechanical malfunctions (hanging chads). Others claimed it was racism against blacks who would have voted for Al Gore. The problem, according to Lott, is not that black voters were more likely to have cast non-voted ballots. It’s that Republicans of all races were more likely to have cast non-voted ballets. Black Republicans were 54-66 times more likely to have cast a non-voted ballot than a black Democrat. In other words, for every 2 additional votes cast by black Republicans, 1 did not register a vote for president. With over 22,000 registered black Republicans in Florida, and an election decided by fewer than 1,000 votes, George W. Bush was hurt more by the loss of black votes than Al Gore was. The overall rate of non-voted ballots was 14% higher when the county election supervisor was a Democrat, and 31 percent higher when the supervisor was an African American Democrat.
• There is a bias in the media favorable to Democrats. Lott analyzed news stories of objective economic data, such as unemployment rates, GDP, retail sales, and durable goods. The facts are numerical, but the surrounding news story could be classified as things getting better, worse, or mixed. Given the same underlying economic news, paper headlines are 10-20% more positive during a Democratic presidency, relatively more positive when Democrats control Congress, and reach their most negative when Republicans control both the presidency and the legislature. Again, this variation surrounds the reporting of objective economic data such as the unemployment rate.
• In 1821, 93% of New York’s school age youths attended private schools, almost all of which were openly religious. The Protestant state legislature worried that students educated at Catholic schools were learning the wrong values and would grow up criminals. They wanted to make Protestant schools less expensive in the hopes that some Catholic students would transfer to Protestant schools and learn the correct values. The early system was a voucher program. Catholic students used the government subsidized vouchers to get into more expensive Protestant schools. But then Protestant schools started competing to attract Catholic schoolchildren by teaching Catholic values, which defeated the original intent of the vouchers. The legislature responded by limiting vouchers to the approved Protestant school nearest a student’s home. The subsidy grew until the subsidized schools were getting most of their money from the government while being protected from competition. With the Free Schools Act of 1867, the state simply took over the subsidized schools, which then became public institutions. Today, of course, public schools strongly support government expansion and involvement in American society.

The facts are more or less the facts. To be fair, other studies interpret them differently or use other facts to reach different results. Decide for yourself. While you're doing that, be sure to grab a gun to lower the likelihood you're injured if assaulted.

[Seth · Rating 3 out of 5]

I think this book probably only deserves two stars. I was quickly bored. I gave this book a full read, however, because I attended his lecture on how gun ownership is a proven crime deterrent. His section on guns in the book was good. I also liked the criticism of affirmative action within the police force. His research was far more interesting the last quarter of the book than the more generic free market arguments articulated the first three quarters.

There are more interesting introductions to free market arguments that replace the majority of the value of this book. However, the last quarter is far more original and interesting than the rest. There, the research and conclusions parallel the creative flair found throughout Freakonomics (the book he is responding to). If you liked Freakonomics but disliked some of the axiomatic distrustfulness of corporations and markets, then, Freedomnomics provides somewhat satisfying responses to those elements found in Leavitt's writing. Otherwise, the book is probably not interesting enough to read unless you skip to the last quarter and treat the read as an essay only reading the last three or four research vignettes.

[Don · Rating 5 out of 5]

consumers choose business not politicians, women suffrage 1/3 growth, MT property tax protection, Academia consumes own output, price controls result in shortages, 5%pop and 50%drug costs, neutered allerca cats, medical lawsuits, tenure, private charities with half funds better, postal subsidies, free market most innovative no one spends others money as careful as own, crime drop 90s by 1/3 nyc better cops less regs and prisons and guns, abortion increased crime, more divorce more libs and big govt, absentee voter fraud, MX cleaner and more voters, acorn fraud stl and kc, democrat felons, open poll declarations by media benefit dems, pervasive media bias.

[Tadas Talaikis · Rating 1 out of 5]

I don't love authorities, but where to find a book that honestly examines the real, instead of promoting biases of either side?

Some points of this one:

1) Monopoly is beneficial (then goes contradictory against gov monopolies).
2) When public universities or health clinics charge (you) less, it's predatory.

Etc., as always, unrealistic nonsense. I had noticed very long ago one paradox - people, who declare X, actually are prone to -X, e.g., people who declare "god's love" are usually bastards full of hate. As I read much later, this is how human psychology works.

[Wendi Lau · Rating 3 out of 5]

Unexpected. I've read Freakonomics several times so this is an interesting alternative. The author believes politicians are mostly honest based on behavior in the second term and campaign contributions. Not sure I agree with that conclusion but it is different.

[Shane · Rating 4 out of 5]

Great rebuttal of Freakonomics

[Anastassia · Rating 1 out of 5]

A book aimed to dismiss half-baked theories is full of half-baked theories itself... disappointing

[Kiri · Rating 3 out of 5]

The author does an admirable job of explaining the incentives built in to the free market, and why they work so well. I would have given it four stars were it not for the "Rebuttal to Freakonomics" subtitle; while the author does rebut the "Freakonomics" theory that the legalization of abortion was the cause of the drop in crime during the '90s, most of the book is not a rebuttal but rather addressing different issues.

While in some instances Levitt (the author of "Freakonomics") did not apply his own concepts to the examples he was analyzing, the central concepts of his book have merit - that there are often hidden factors behind and unanticipated reactions to human behaviors. While Lott does quote from "Freakonomics" to support his view that Levitt is promoting suspicion of corporations and of professionals from doctors to real estate agents, I gotta say I did not come away from the book thinking that that was the central message.

Re: Lott's rebuttal of the "abortion lessens crime" theory; he makes a good case, although I can't help but think that in the stats on single vs. married vs. cohabiting parents there is a generational shift that will in time change these factors. Cohabitation used to be frowned upon, has become endemic and has lost much of its stigma.

In his analysis of why Ph.D. candidates do not need a time limit set to attain their degree he suggests that there is an incentive for such candidates to finish in a shorter period of time, as they then appear smart and assertive and focused. It seems to me that there is also the possibility for the candidate who pushes through in the minimum time to be rushing his research specifically in order to appear focused and get a job faster. Not that there's anything wrong with that, but it's not quite as simple as Lott presents it.

[Bryan · Rating 3 out of 5]

This was an interesting book, and would be a counter to Freakonomics (which I also enjoyed). I am writing this review a few weeks after finishing the book, so some of the details are fuzzy. It would be nice to read them next to each other and see how they compare, as they both have interesting observations and facts to back them up. At times I think the author reads more into something than actually exists (politics section).

It is a fairly quick read.

[Rachel · Rating 2 out of 5]

While I am conservative and do agree with many of the author's views, I found the book to be bias for the sake of being bias. In one instance he claims lack of regulation is good for society and then a few chapters later he seems to claim regulation is better for society. I almost quit reading it, but dragged on to the end.

[Allison · Rating 1 out of 5]

Utterly forgettable. I cannot stand authors with such a blatant agenda. At least let me figure out the agenda for myself! He lost me when he tried to assert that children are safer in homes with guns.

[Vanessa · Rating 5 out of 5]

An excellent, fact-filled book. Dr Lott will present the truth to you as it is, and won't white-wash anything. This one's a keeper and should on every bookshelf in every home, so people have the facts at their fingertips.

[Paul · Rating 2 out of 5]

Big donors "allegedly" buy influence through campaign contribution? Allegedly?! What a crock of shite.

Does raise some interesting issues about unintended consequences of regulation that others fear to discuss.

[Andy · Rating 5 out of 5]

Couldn't recommend more. Excellent explanations throughout of why the free market works better than anything else, in everything where it is used (greatly simplified).
Wow.

[James · Rating 5 out of 5]

Great book. Read my review of Freedomnomics by clicking here.

[Northman 737 · Rating 5 out of 5]

This was a really interesting book obviously centered around economics but with real world examples and statistics. Everybody should be required to read this in high school or at least in college.

[Kyle Grindberg · Rating 5 out of 5]

It did an excellent job of responding to the claims made in Freakanomics with data. Very helpful book.

[Michael Tarpinian · Rating 4 out of 5]

Capitalism works. Freakonomics is flawed. The Stephen’s blame the capitalist for every ill.

[Alex · Rating 4 out of 5]

Pretty interesting

[Martti · Rating 3 out of 5]

Why the Free Market Works and Other Half-baked Theories Don't - interesting, but John Lott's arguments themselves seem half-baked at a time. Nonetheless this is an important "counter" to the behavioral economics of Kahneman, Tversky, Ariely, Thaler, Sunstein, "freakonoms" Levitt, and Dubner. The complexity lies in the fact that statistics is hard. Lott has the same data as Levitt, but the interpretation is difficult. And if the data seems clear, then you can always counter that the question was asked in a wrong, limiting way. Or perhaps you forgot that correlation does not imply causation. But it's clear that the answers are in the Big Data and Evidence Based Science. We just need more experiments, evidence and explanations.

Lott argues for totally free market and trusts the "system" implicitly. Also democracy and voting. You should read it regardless of your position in economics, politics, or general philosophy. To gain perspective. A logical read in the row where you would put "Freakonomics", "Super Crunchers", "Nudge", "Moneyball", etc.