I don't know Levitt's answer here, but one explanation (besides the obvious "they're idiots") for why people become drug dealers when the economic returns are poor is that being a drug dealer offers -- and, especially during the crack boom, offered -- nonmonetary returns, by having much more status than working minimum wage . . .
My historian-brother often says that one of the most interesting phenomena that he's observed is the cross-cultural willingness of people to trade away economic benefits for status. I suspect that this is one example of that. So, in a surprisingly similar way, is being a politician. That's an obviously poor economic move for most folks. But one of the drug dealers in Price's book talks about how he likes the way he becomes the center of attention when he enters a room full of junkies. Politicians, I think, get the same thing, especially in the bubble-environments of Washington, or state capitals. I suspect, in fact, that people are, to varying degrees, hardwired to get an endorphin rush from that sort of attention, just as they're hardwired in varying degrees to respond to drugs.
I've noticed the same thing in the music industry; rarely are the rank and file paid according to their effort. I emailed Insty this:
Enjoyed your "Freakonomics" review, and as someone who has a number of friends in concert production, I can assure you that a large proportion of them aren't doing it for the money. You'd be appalled, or maybe you wouldn't, at what some of the hardest-working people around settle for monetarily when they can get and give free tickets/backstage passes to concerts, and hang around with rock stars. I understand the film industry has the same weird pull. As someone who briefly dallied in concerts, the ironic part is that after a year of being required to attend all of the shows my company produced in a job setting, I had pretty much lost interest in live music altogether.
Sad but true. Until I was out of the scene for a while, I enjoyed the access and "status" more than the music itself. You don't really get to enjoy shows much when you're running around stressing and working, and that's even more of a reason not to trade money for access and status. Plus it's no fun finding out your musical heroes are short, mean, or bad live musicians (or all three).