With a title sure to burn through popular culture like a grass-fire, Freakonomics: A Rogue Economist Explores The Hidden Side Of Everything is a book by Steven D. Levitt and Stephen J. Dubner that includes brief studies and conclusions about what incentifies people, particularly real estate agents. The National Association of Realtors finds their research and conclusions not only unflattering, but flawed, according to sources.

The Freakonomics authors' website Freakonomics.com, enthuses, "Steven D. Levitt is not a typical economist. He is a much-heralded young scholar who studies the riddles of everyday life-from cheating and crime to sports and child-rearing -- and whose conclusions regularly turn the conventional wisdom on its head. He usually begins with a mountain of data and a simple, unasked question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: Freakonomics.

"Through forceful storytelling and wry insight, Levitt and co-author Stephen J. Dubner show that economics is, at root, the study of incentives -- how people get what they want, or need, especially when other people want or need the same thing. In Freakonomics, they set out to explore the hidden side of … well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan."

Levitt, a professor in the Department of Economics at the University of Chicago, and Dubner, a journalist, obtained MLS data from the Chicago MLS and noticed that Realtor-owned homes stayed on the market and sold for more money than clients' homes. Levitt's basic argument is "that realtors get 3 to 4 percent more for their own houses and leave their own houses on the market 10 percent longer. This suggests to us that at least some agents do not share the views of the NAR that it is in their own self interest to look beyond immediate profit opportunities," according to the authors' blog.

For example, when one sells a home for $300,000, and the price is increased to $310,000, the homeowner would get an additional $9,400 while the Realtor is getting the relatively low additional incentive of $600 (based on a six-percent $18,000 commission.) When selling their own homes, Realtors get the whole enchilada, which means they are highly incentified to keep prices higher on their own homes, while the relative payoff on a client's home is so meager that it isn't worth marketing longer and for more money.

From that, Levitt concludes that Realtors don't have incentive when selling homes on commission to price homes higher, says Yun. They prefer to price low to reduce their time on the market and therefore, their marketing costs.

Explained Levitt to Realty Times, "People respond to incentives. In the current set-up, agents have an incentive to behave differently when selling their own home."

That's because as sellers they are responding to a wholly different set of incentives, insists the National Association of Realtors. Although statistics don't exist whether or not the Realtors' homes are primary residences or investments, the NAR counters that Realtors are likely selling investment homes that don't meet Levitt's idea of investment real estate - homes that are flipped more than once within a three-year period.

Investors don't flip, suggests the NAR, and are more likely to hold their properties longer than three years, so Levitt's model doesn't eliminate investors as effectively as he might believe.

Lawrence Yun, senior economist for the National Association of Realtors, says, "When we look at the MLS data (Levitt's) the data indicates that 3.4 percent of all home sales were Realtor-owned. And that is very high from our perspective. In the best of years, only one percent of the workforce is real estate agents, so there is a discrepancy between the number of Realtors and number of homes for sale. The only way to justify such figures is that 3.4 percent homes are not primary residences, but investment properties that the Realtors own. And with investor homes, sellers can usually wait and not worry about selling a home quickly because they don't have to time the sale with the school year or job transfers. They can be more patient."

Because of their unique knowledge and experience with real estate, it is likely that Realtors are frequent investors in residential real estate. "It's bonus income, and Realtors are much more likely to be investors than the general population," says Yun.

Yun says that the authors answered a response from the NAR, and told the NAR that they excluded investor homes in their study by eliminating homes that had been sold more than two times in a three-year period, but that didn't help the NAR's case.

"Those homes aren't investments," argues Yun. "Investing means you hold it for a while. Realtors aren't as likely to flip homes because they know that real estate builds value over time."

Levitt assumes that the real estate transaction is a one-time transaction, says Yun. "We know homeowners move every 7-10 years and they often use the same Realtors and the bulk of their business comes from referrals. If Realtors are interested in retaining business and getting more business, there is no incentive to shortchange the client."

He says that the authors conceded that referrals and repeat business are incentives for Realtors, but the concession has occurred too late for the publication of the book and the round of talk shows in which real estate agents are held up as an example of incentives that don't work.

In fact, on Levitt's blog, he explains that to write his book, he "put myself in the shoes of the actors and I ask myself "what would I do if I were in that situation?" And I am the kind of person who is always trying to concoct some scheme to beat the system or avoid getting scammed, so I presume the people I'm studying are thinking the same way."

Levitt says on his blog, "When I think about real-estate agents, I'm constantly paranoid they are trying to screw me."

In response to a Today Show appearance, recently, NAR vice president Steve Cook wrote producers, "In the case of the average consumer transaction, it's frequently to the advantage of the consumer to make a transaction in a timely manner, due to family and personal factors. It is a fact that price concessions often become deeper the longer a home stays on the market. Sellers needing to move may have to make a price concession with each passing week. In the practical world, if agents were trying to make a higher commission, seems to me they'd leave the property on the market longer to get the higher price Levitt thinks is forthcoming."

"Professor Levitt overlooks the obligation of real estate agents to exercise due diligence on behalf of clients. Doing due diligence is an agent's legal obligation, as well as a moral and professional one. In fact, the National Association of Realtors was one of the first trade associations to adopt a code of ethics. NAR members are required to receive training in our Code of Ethics and review this subject matter on a periodic basis. A major emphasis in this Code is the obligation of due diligence which the agent owes to clients."

In Chapter Four of his book, Levitt writes, "We smirk now when we think of ancient cultures that embraced faulty causes-the warriors who believed, for instance, that it was their raping of a virgin that brought them victory on the battlefield. But we too embrace faulty causes, usually at the urging of an expert proclaiming a truth in which he has a vested interest."

Like ... selling a book, perhaps?

To see Freakonomic blog responses to NAR's letter, click here.