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Freakonomics by Steven Levitt

ktan's picture


The book Freakonomics is composed of a series of essays in which the author and rogue economist, Steven Levitt, demonstrate how, by applying basic principles of economics, data often reveal fascinating truths about how the world works. Along the way, the authors discuss a myriad of seemingly unrelated topics, ranging from sumo wrestlers to drug dealers to baby names. The book, however, is not directly about any of these topics, but it is "about stripping a layer or two from the surface of modern life and seeing what is happening underneath." Similar to how Bio 103 strives to look at Biology in a non-traditional way through summaries of observations, Freakonomics applies economics to the real world through the same unconventional fashion and opens the readers’ minds to the idea that things are not really what they seem, or rather, what you have been told.
The book proposes to demonstrate the following four fundamental ideas:
  1. Incentives are the cornerstone of modern life.
  2. “Experts” use their informational advantage to serve their own interests
  3. Conventional wisdom is often wrong.
  4. Dramatic effects often have distant, even subtle, causes.
These four ideas explored throughout the book sheds fascinating insights on how seemingly unrelated subjects are actually very connected to each other, in a cause-and-effect sequence which are influenced greatly by the conventional wisdom of “experts” in hopes of manipulating the situation to serve their own interests.
Levitt defies economics as nothing more than the study of incentives and how they are pursued which exemplifies the first idea, “incentives are the cornerstone of modern life.” Sometimes a particular set of incentives is so irresistible that people are driven to attain them through unscrupulous behaviour, more commonly through cheating. What is interesting, though, is how the author devised a way of analyzing data to detect not only the presence of cheating, but also some of the patterns and incentives that may have served to compel the cheaters to act unethically. The cases that are afforded the most attention include the Chicago public school teachers who changed answers on their students’ high-stakes standardized tests and Japanese sumo wrestlers who conspired to throw certain high-stakes matches.
 The next idea that “’experts’ use their informational advantage to serve their own interests” centres on the theme of information and the way that individuals, organizations, and businesses often exploit their access to crucial information at the expense of others. First, the author describes the way that journalist Stetson Kennedy exploited information to help bring about the downfall of the Ku Klux Klan through manipulating his way inside their ranks, and then selling the information out to the public. Then, Levitt’s research on the actions of real estate agents offers another perspective to the discussion. His analysis of real estate data found that agents behave quite differently when the homes they are selling are their own.
Levitt’s details the theory that “conventional wisdom is often wrong” in his study of the safety of backyard swimming pools, which found that children are 100 times more likely to drown in a backyard pool than they are likely to die while playing with a gun. He also addresses aspects of parenting and the way that parents’ actions and choices can impact the outcomes of their children’s lives’ but not in the way one would think. The author found that “good” or “positive parenting outcomes” on their children are connected more strongly to factors such as socioeconomic status and the education of parents as well as genetics or biological factors.
The last main idea running throughout the book is that “dramatic effects often have distant, even subtle, causes,” which Levitt proves through controversial topics. An example would be his theory on why the crime rates in America drastically fell since the 1970’s when they were in fact predicted to skyrocket by the 1990’s and beyond, if the statistical trend were to continue.  His research showed a link between the legalization of abortion in the United States in 1973 and the drop in violent crime in the 1990’s. The author’s research suggests that the drop in violent crime in the United States occurred at the same time that the first wave of babies conceived after the legalization of abortion were entering late adolescence. The author claims that many of the additional children who would have been born annually if abortion had remained illegal would have been at high risk for engaging in violent crime. Although Levitt remains neutral on the issue of abortion and does not take an ideological stance, he does conclude that women with the right to choose abortion tend to make good decisions.
Overall, Freakonomics is a testament to what we have been doing in Bio 103, which is to work with summaries of observations in order to come to a conclusion, rather than to accept what conventional science tells us. In some way, the idea that “incentives are the cornerstone to modern life” is not only applicable to “modern life,” but throughout the existence of life in general. In my second web paper, I explored the reasons as to why sex became the dominant form of production, although it is more dangerous and troublesome that other methods. I came to the conclusion that this happened because of our incentive to survive changing environments, as well as protecting our species from extinction. However, I found the idea of finding patterns very interesting, especially because of my lab class’ discussion on “patterns” and “randomness. ” The fact that these patterns Levitt observed on cheating happen randomly (and he only sees the pattern because he put meaning to them) is astonishing. Also, the idea that so called “experts” manipulates their informational advantage can also be applied to how scientists manipulate society’s “conventional wisdom.” Not only scientists in general, but scientists in areas of the world that have dominated the fields through hegemonic force. Furthermore, it reminded me of the Three Doors of Serendip in our last lab in that our “understanding” of things is more often than not, very limited. Thus, as exemplified by this part of Levitt’s book, there really is no “conventional wisdom,” because it is all more of a summary of observations that can (and most likely will) be proved “wrong” in another time.
The last main topic in Freakonomics, that “dramatic effects often have subtle, distant causes, is the one that really intrigued me the most. The idea that one small action I do today will impact the future in ways that I won’t even realize is overwhelming. It also makes me feel strangely important yet irrelevant at the same time, because although my every single one of my actions will leave an imprint on the world, it is only a few of the billions of actions that will influence the world.  Of course, there are most likely more explanations—more causes to these effects—than the single explanations given for each example in this book. However, I think that the author’s point comes across very strongly: we cannot try to control the outcome of things in the big picture, because our actions have a sort of “ripple effect,” in that when we set out to change something, we will inevitably cause something else to change as well.
Levitt prefaced the book by warning the readers that “there is no unifying theme of the book, although the aim throughout is to explore the hidden side of things and the subtle relationships that link everyday phenomena.” This, in its very essence, is what we have been striving to do in Bio 103. Through unconventional means, I have been able to rethink the way I perceive the world, make connections with seemingly unrelated topics, as well as be wary of the “truths” that have been forced upon my way of thinking, by the so called “experts” of the fields.
Levitt, Steven D. and Lubner, Stephen J. “Freakonomics.” William Morrow, May 2005.




Paul Grobstein's picture


"makes me feel strangely important yet irrelevant at the same time, because although my every single one of my actions will leave an imprint on the world, it is only a few of the billions of actions that will influence the world."

Its an interesting feeling, to be a grain of sand, a part of lots of things, a determinate of nothing?  Interesting too to be freed from the constraints of "conventional wisdom"?  Sounds like there is indeed a "unifying theme" ... to encourage a recognition that we are all participants in shaping/making sense of the world?  I like the idea that that is a unifying theme of Bio 103 as well.  Thanks.