Book Summary : Freakonomics

A Rogue Economist Explores the Hidden Side of Everything

Steven D. Levitt and Stephen J. Dubner

A very interesting writeup by Stevan D. Levitt and Stephen J. Dubner about human mind and influence of economics in shaping the world today. It is an easy read by very intruging to find out new perspectives of looking at things and how it happens to us in everyday life. The book is full of real life instances and not a single story for the entire book. At the end however, all the chapters although curated from different situations going on the the contemporary world, starts coming together.

Happy reading!

The first chapter focusses on the power of incentives on us. How everyone around us in driven by incentives. Here it is shown that if the incentives seems right and helping them feed their family and progress in their career, it is okay to cheat. Apart from economical we also react to moral and social incentives. An interesting instance is :

One one hand, we are asked to donate blood promising a renumeration of 10 euros and on the other hand we are asked to donate blood to the old people to help hem recover from diseases. People are most likely to do the later as the moral incentive in this case is higher than the economic incentive given.

For similar incentives driven causes: School teachers in chicago were bound to cheat to get their schools grades higher and higher provided the extreme economic incentives by the government. Similar is in the case of sumo wrestlers of Japan who cheat in a routinely manner so that everyone get the government incentive.

The second chapter focusses on the rise and fall of Ku Klux Klan and their entire operations. This chapter shows the final fall of the clan, when one of their rebels within their group leaked all their secrets and there membership started declining. This chapter shows how powerful information is. Once there information and secrets were leaked they no longer own any important value.

Similarly the real estate agents try to flex their information about the market making us believe that we are getting the best possible deal however they themselves purchase a similar property a few weeks later at a lower price. We still try to get real estate agents, as we believe real estate agents or any person having expertise (information) in a domain offer convenience and expertise to actually sell the home in the first place or get the best deal for them.

The third chapter is one of the most interesting ones where Venkatesh studies the cocaine rise in the states. He stays and learns their way of living, their incentives. He later collaborated with a colleague to study the finance books of the drug dealers , which was again leaked by one of the insiders and found out that they operate like McDonalds with a proper heirarchical company structure . The top ones are millionaires and the foot solders still earn below minimum wage.

In this profession, the moral incentive is non existent, the social incentive is there a little as everyone from their community does it and economic incentive is huge if they get into one of the top most positions.

The concept of conventional wisdom is focussed here where we generally try to spread ideas that reinforce my personal self-interests, self-esteem and well-being and mask out the rest. For example: News media tries to focus on information which might be partially true or sometimes even completely false to promote their publicity.

The most interesting and surprising is the fourth one on a sudden drop of crime rates in US. A lot of different contributing factors were discussed like economic growth, higher police recruitments etc., however it was found that it is due to legalization of abortion that the crime rates dropped. As happier mothers give birth to happier kids and eventually calmer citizens o the country.

This event of drop of crime happened in the 1980’s and the legalization of abortion happened in the 1960’s so by 1980’s the kids born in the 60’s were turning 20’s and they were happy and economically stable enough to commit crimes.

The next chapter focusses on the obsession of being the perfect parent and what all actually mattered for a child to be successful. A study in Chicago school system revealed that in a student’s high school achievement, school choice barely mattered. This was to study the obsession of parents of sending their children to the best school possible.

On the contrary, the study revealed that the students intellect actually depends on how the lifestyle of the parents were while they were growing and not basis on how the parents changed after the kid was born.

The last chapter is again on “best” name obsession that parents have for their kids. There are several funny instances in this chapter about how a father names one of his kids “Loser” and the other kid “Winner” and eventually the “Winner” becomes a thief and loser works in the NY police department.

The correlation between names and their success rate was also discussed in this chapter, specifically if “traditional” black names made an indivisual successful and “whitish” names actually led to someones success. But it was not the case. The “black” people who were not successful were not because of their names but because of their socioeconomic standing and less formal eduction of their parents. This also sometimes leds to people thinking blacks are “less intelligent” and eventually getting less interview calls than their white counterpart with the same qualification.

I will really recommend to read this book. It is fairly an easy non-fiction read and they also have a bonus section after this chapters if you want to know more.