The book Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don’t by John R. Lott, is a mixed bag. It makes a strong case for free markets and democracy, but contains a healthy measure of partisan politics that undermines the reader’s confidence in various analyses.
In part, this book is a rebuttal to Freakonomics, by Dubner and Levitt whom Lott likens to Michael Moore. Whatever you think of Dubner and Levitt’s ideas, they are a far cry from Moore’s populist (but entertaining) rants. In the end I found the criticisms of Freakonomics unconvincing, although Lott may be right on some points – it’s hard to separate his sound analysis from the apparent political bias.
Lott makes a convincing argument for free markets working much better than having governments run industries. The role of governments should be to keep free markets working properly and not to interfere overly. However, free markets tend not to work properly in two situations:
1) When consumers lack necessary information.
2) When a company or group of companies monopolize a market.
Lott would keep the government out of everything, but I would have governments mandate effective disclosure and either break up monopolies or regulate them. Lott argues against regulating monopolies with the example of granting a monopoly on a drug to its inventor. However, this is very different from a monopoly over an entire industry, such as cable television or local telephone service where regulation is necessary to protect consumers.
People seem to believe that gasoline prices should be controlled by governments, but Lott argues convincingly that this would simply lead to shortages. The free market does a better job of balancing price and availability of gasoline.
The most surprising part of the book for me was the assertion that concealed handguns give a “clear social benefit”. The idea is that criminals will think twice before committing a crime if they think the people around them might be armed. I find it hard to believe that this benefit outweighs the negative of having otherwise inconsequential everyday conflicts potentially escalate to shootings.
Lott argues that licensing of professionals has little to do with guaranteeing competence and is mainly done to keep new entrants out and protect the incomes of existing professionals. Lott asks why there are extensive training requirements instead of just rigorous testing. The answer, of course, is that mandatory extensive training keeps people out of the profession.
Lott thinks that the government should not ban smoking in bars and restaurants and let the free market decide. I can’t agree with this one. Tobacco may be legal, but it is clearly harmful. There is a major benefit to everyone if we can go about our days without breathing second-hand smoke. Without a government ban, this would not be possible.
Levitt and Dubner argued that abortion reduces the number of unwanted children. Lott argues that abortion leads to more women raising children out of wedlock. I had a hard time following the logic on this one.
In general, this book started as a defense of free markets and slowly turned into partisan politics denouncing all sorts of things including car safety devices and gun locks. If you like to have your views challenged in an intelligent way, this book may do it for you.