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Imagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 p.m. But very often parents are late. The result: at day's end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?
A pair of economists who heard of this dilemma -- it turned out to be a rather common one -- offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free?
The economists decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel. The study lasted twenty weeks, but the fine was not introduced immediately. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident. The fee would be added to the parents' monthly bill, which was roughly $380.
After the fine was enacted, the number of late pickups promptly went ... up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.
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. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty -- it may involve coercion or exorbitant penalties or the violation of civil liberties -- but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.
We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight A's from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your father's insurance company. But if you perform so well that a rival company comes calling, you become a vice president and no longer have to work for your father. If you become so excited about your new vice president job that you drive home at eighty mph, you get pulled over by the police and fined $100. But if you hit your sales projections and collect a year-end bonus, you not only aren't worried about the $100 ticket but can also afford to buy that Viking range you've always wanted -- and on which your toddler can now burn her own finger.
An incentive is simply a means of urging people to do more of a good thing and less of a bad thing. But most incentives don't come about organically. Someone -- an economist or a politician or a parent -- has to invent them. Your three-year-old eats all her vegetables for a week? She wins a trip to the toy store. A big steelmaker belches too much smoke into the air? The company is fined for each cubic foot of pollutants over the legal limit. Too many Americans aren't paying their share of income tax? It was the economist Milton Friedman who helped come up with a solution to this one: automatic tax withholding from employees' paychecks.
There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack "sin tax" is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive.
Some of the most compelling incentives yet invented have been put in place to deter crime. Considering this fact, it might be worthwhile to take a familiar question -- why is there so much crime in modern society? -- and stand it on its head: why isn't there a lot more crime?
After all, every one of us regularly passes up opportunities to maim, steal, and defraud. The chance of going to jail—thereby losing your job, your house, and your freedom, all of which are essentially economic penalties -- is certainly a strong incentive. But when it comes to crime, people also respond to moral incentives (they don't want to do something they consider wrong) and social incentives (they don't want to be seen by others as doing something wrong). For certain types of misbehavior, social incentives are terribly powerful. In an echo of Hester Prynne's scarlet letter, many American cities now fight prostitution with a "shaming" offensive, posting pictures of convicted johns (and prostitutes) on websites or on local-access television. Which is a more horrifying deterrent: a $500 fine for soliciting a prostitute or the thought of your friends and family ogling you on www.HookersAndJohns.com ...
| Introduction : the hidden side of everything | 3 | |
| 1 | What do schoolteachers and sumo wrestlers have in common? | 19 |
| 2 | How is the Ku Klux Klan like a group of real-estate agents? | 55 |
| 3 | Why do drug dealers still live with their moms? | 89 |
| 4 | Where have all the criminals gone? | 117 |
| 5 | What makes a perfect parent? | 147 |
| 6 | Perfect parenting, Part II; or : would a Roshanda by any other name smell as sweet? | 179 |
| Epilogue : two paths to Harvard | 205 |
Chapter One
What Do Schoolteachers and Sumo Wrestlers Have in Common?
Imagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 P.M. But very often parents are late. The result: at day's end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?
A pair of economists who heard of this dilemma—it turned out to be a rather common one—offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free?
The economists decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel. The study lasted twenty weeks, but the fine was not introduced immediately. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident. The fee would be added to the parents' monthly bill, which was roughly $380.
After the fine was enacted, the number of late pickups promptly went . . . up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.
Economics is, at root, the study of incentives: how people get what they want, or need, especially when other peoplewant or need the same thing. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty—it may involve coercion or exorbitant penalties or the violation of civil liberties—but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.
We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight A's from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your father's insurance company. But if you perform so well that a rival company comes calling, you become a vice president and no longer have to work for your father. If you become so excited about your new vice president job that you drive home at eighty mph, you get pulled over by the police and fined $100. But if you hit your sales projections and collect a year-end bonus, you not only aren't worried about the $100 ticket but can also afford to buy that Viking range you've always wanted—and on which your toddler can now burn her own finger.
An incentive is simply a means of urging people to do more of a good thing and less of a bad thing. But most incentives don't come about organically. Someone—an economist or a politician or a parent—has to invent them. Your three-year-old eats all her vegetables for a week? She wins a trip to the toy store. A big steelmaker belches too much smoke into the air? The company is fined for each cubic foot of pollutants over the legal limit. Too many Americans aren't paying their share of income tax? It was the economist Milton Friedman who helped come up with a solution to this one: automatic tax withholding from employees' paychecks.
There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack "sin tax" is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive.
Some of the most compelling incentives yet invented have been put in place to deter crime. Considering this fact, it might be worthwhile to take a familiar question—why is there so much crime in modern society?—and stand it on its head: why isn't there a lot more crime?
After all, every one of us regularly passes up opportunities to maim, steal, and defraud. The chance of going to jail—thereby losing your job, your house, and your freedom, all of which are essentially economic penalties—is certainly a strong incentive. But when it comes to crime, people also respond to moral incentives (they don't want to do something they consider wrong) and social incentives (they don't want to be seen by others as doing something wrong). For certain types of misbehavior, social incentives are terribly powerful. In an echo of Hester Prynne's scarlet letter, many American cities now fight prostitution with a "shaming" offensive, posting pictures of convicted johns (and prostitutes) on websites or on local-access television. Which is a more horrifying deterrent: a $500 fine for soliciting a prostitute or the thought of your friends and family ogling you on www.HookersAndJohns.com?
So through a complicated, haphazard, and constantly readjusted web of economic, social, and moral incentives, modern society does its best to militate against crime. Some people would argue that we don't do a very good job. But . . .
Freakonomics Rev EdWhich is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? What kind of impact did Roe v. Wade have on violent crime?
These may not sound like typical questions for an economist to ask. But 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.
What unites all these stories is a belief that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and - if the right questions are asked -- is even more intriguing than we think. All it takes is a new way of looking. Steven Levitt, through devilishly clever and clear-eyed thinking, shows how to see through all the clutter.
Freakonomics establishes this unconventional premise: if morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.
Discussion Questions:
About the authors
Steven Levitt is a Professor of Economics at the University of Chicago and an editor of The Journal of Political Economy. In January 2004 he was awarded the John Bates Clark medal -- for the economist under 40 who has made the greatest contribution to the discipline -- by the American Economic Association.
Stephen J. Dubner is the author of Confessions of a Hero Worshiper and Turbulent Souls and is a former writer and editor at the New York Times Magazine. He lives in New York City with his family.
Anonymous
Posted October 27, 2008
I Also Recommend:
This book is a general interest book- and it certainly is interesting. The book, for anyone looking for an entertaining read, will like it. In a nutshell, the book takes a look at all sorts of things in society, from crack gangs to parenting, and then attempts to make sense of them by applying econonmic principles. According to the book, economics is really the study of incentives, and so using this kind of angle, the book comes up with answers to why things work the way they do. <BR/><BR/>A book that's hard to put down, I'm sure many readers will enjoy it. Also recommend The Sixty-Second Motivator for a more simplistic explanation of what motivates people and gives them incentives to do what they do.
19 out of 19 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.MaykelP
Posted March 28, 2012
Freakonomics was a very good book. i thought this book was going to be one of those boring economics with only numbers and weird vocab books , but it turned out to be an easy read. i like the way the booked wasn't much address to the number but how to solve and achieve preblems in life and the connection with econommics; also hepls you understand things such as " why do drug dealers still live with their moms"(Freakonomics). a question answered in the book.
4 out of 4 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Pass
Posted January 5, 2010
Freakonomics provides the reader with the chance to take a new perspective on many different topics. It answers a seemingly complex question of why exactly drug dealers live with their mothers and shows how gangs are the reason why. This book is one that you would not want to put down and will want to read it through to the end. I would suggest that everybody reads this book and learn from it some very hard lessons. A chapter in the book describes how criminologists incorrectly found the answer to the 1990's crime rate drop and how that drop is linked to the legalization of abortion. Levitt and Dubner also show how everybody responds to an incentive, comparing the prices real estate agents get for their house versus their clients; also providing why a sumo wrestler is like a school teacher. This book shows the reader the hidden side of decision-making and how the economy works. It provides an insight to the world of economists and into the world of both psychology and sociology. From the book you can learn ways to bring patterns out of data (even though this wasn't an intention of the book) which is a very valuable skill to have. Another thing to learn is that common, conventional wisdom is mostly made up of lies and is created by "experts" in their own interest. It explains how those experts manipulate people by using their ignorance against them, and hopefully will teach the reader not to believe everything they hear. This book is one that every person needs to read at some point in their life, as it provides many different answers to life's questions and presents the method for answering those. Those methods can be used to answer your own personal questions and will help you out during your entire life.
3 out of 3 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.SSSMN
Posted May 1, 2010
I Also Recommend:
I listened to the audio book Outliers by Malcolm Gladwell before I listened to Freakonomics. They are similar in style -- drawing conclusions about modern phenomena based on outlying characteristics. But Gladwell does a better job of telling compelling stories.
Freakonomics was more negative - discussing cheating teachers, drug gangs, etc. Gladwell found interesting correlations in less cynical subjects.
2 out of 2 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Annie_IRP
Posted February 26, 2010
Freakonomics is certainly not the type of book I usually read, but I couldn't resist after all that I had heard about it. The six sections of the book, each bearing an intriguing title, explore truths behind modern day conventional wisdom, incentives, and morality. Covering a wide range of topics, from sumo wrestling to the bagel business to the Ku Klux Klan, the book offered a refreshing perspective to a few fascinating questions.
Levitt's argument that legalized abortion played the central force behind the crime drop of the 1990s, though at first startling, seemed to be thoroughly supported with convincing evidence. This trend follows throughout the book, as the authors present plenty of statistics for each of their findings and let the numbers speak for themselves. Levitt and Dubner stand strong despite all controversy, further solidifying their arguments as well as making the expanded version an interesting read.
Overall, the book was well-written and intended for a lay audience, straying away from sounding too scientific. Each chapter proved entertaining, as Dubner explains logical arguments with enthusiasm and a bit of humor. I truly enjoyed the eye-opening approach that Freakonomics offered and the strange topics of interest, learning much along the way.
2 out of 2 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.I absolutely loved this book. As an economics major it is so great to see the field studied and written about in a practical use that the majority will find interesting, even without ever really understanding an economics class. The reasearch was very thorough and the book is so fun and unique. It is a must read! I read this when it first came out years ago and I have re-read it multiple times out of the pure enjoyment of it.
2 out of 3 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.eveyykim
Posted June 4, 2009
Personally, the book did not appeal to me. But I have to agree that the book had a lot of interesting facts, and that I did learn a lot. It is an easy to read book and has humor, making the reading exciting to many.
2 out of 2 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.tjm22
Posted December 7, 2008
Freakonomics by Steven D. Levitt and Stephen J. Dubner is an easy, interesting book, even for people who do not usually like nonfiction or economics. Although based around economics the boook links people and situations that one would never believe could be linked before reading the book. With such chapters Why do drug dealers still with their parents? and What do sumo wrestlers and teachers have in common? the book only gives the facts about the situations and leaves readers up to the challenge of figuring out what these facts mean. As I opened the book I never believed it would keep my attention throughtout. But as the facts came out and two totally different situations were linked I couldn' t put the book down. This book is good for anyone intersted in learning random facts that can be turned into a whole diffrent level of learning. Fun and interesting this book could be read by almost anyone.
2 out of 3 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted October 5, 2008
Even though I did not think I would enjoy reading a book about economics I was pleasantly surprised by Freakonomics. It takes an unusual approach asking questions like ¿What do schoolteachers and sumo wrestlers have in common?¿ and ¿Where have all the criminals gone?¿ While some may not want to believe that the legalization of abortion is part of the reason crime rates have gone down the book shows you how the two are connected. Freakonomics is almost like a murder mystery that keeps you guessing to find out how and why two unrelated things are correlated. The book is packed with surprises and defines not how we see the world work, but how it actually does work. Even after finishing the book I went back to re-read some chapters because they were so intriguing .
2 out of 5 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.trichick1225
Posted December 12, 2012
I felt the book was interesting and intriguing. It breaks down the concepts of economics into bite-sized read. It's a fanatic book and a good read
1 out of 1 people found this review helpful.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted December 7, 2012
Freakonomics was awesome! MUSSSSSSST READDDDDD :)
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted November 30, 2012
Loved it.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.AM_Olga_
Posted April 6, 2011
This unconventional economics book hooks a reader at first glance. It can relate to anyones life; since it portrays societies daily hardships. By doing so, its a simple, intriguing quick read, that one will never forget. Hands down, greatest economics book!
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Chrisperez123
Posted March 22, 2011
The topics in this book, ranging from cheating sumo wrestlers to crafty Real Estate agents, are explained with the full spectrum of possibility in mind. This book does a fantastic job of widening one's perspective and making one much more critically inclined. This is the type of book that anyone could benefit from reading, regardless of age or occupation. I'd recommend it to anyone!
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Steven Levitt and Stephen Dubner do an excellent job in detailing a subject (economics) that many do not like to discuss. The real world examples and relations that they use make it not only an informative read, but also one the reader can relate to real life examples. I recommend this book as well as the follow up SuperFreakonomics.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted December 10, 2010
This book is really fun to read! Lots of really cool stuff you would have never thought of! I highly recommend it!
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.DP2010
Posted November 7, 2010
I liked how they used different and weird situations to describe economics and how we should pay close attention to the world and our surroundings. It shows that economics is everywhere and it takes some real life situations and describes it so that you do know whats going on and how you would never guess who would cheat but they will just to get money. I loved how they related two really different topics together and made them relate in a way that we understood and think is creative. It just shows us that economics can be related to anything and described to two very different things and it was very interesting to read for me.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Gparcells
Posted November 8, 2010
I found this book to be very interesting. I liked the fact that it had a lot of examples to help support the author's thoughts. I also liked the fact that the stories were about topics that I had enough knowledge about to know what the author was talking about. The only thing that troubled me about this book still is the organization. Throughout all the chapters, and stories for that matter, I had to stop to remind myself what the book was talking about. With all the math, science, and reasoning within every story, I found myself confused and in need of explaining. Overall the book was good and it did help my insight and changed my perspective on how economics work.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.AMcCombs
Posted October 12, 2010
I Also Recommend:
Freakonomics by Steven Levitt and Stephen Dubner is a book in a class of its own. Economics, a typically boring subject based on finances and money, is looked at from a different angle. In Freakonomics, Levitt and Dubner's research shows that economic research can be put into real life situations to help show why some things are the way they are. Although that might sound nearly as boring as economics, both authors choose very interesting topics to relate the informational trends to. Why drug dealers still live with their moms and how the legalization of abortion dropped crime rates nearly 20 years in the future are some of the first topics you will see discussed. This book will leave you in awe and will truly keep you thinking outside the box!
This book is definitely one I would recommend. I think this book was great because it really makes you think in ways you have never thought before. Regardless of your intelligence, Freakonomics brings out ideas that have never gone through your mind. I would recommend this book to almost anyone. Because of some tough vocabulary and deep topics though, I would not recommend attempting this read before at least later teen age. This book is great for anyone who likes to think outside the box and loves learning as they read. Although the book is non-fiction, Freakonomics will still have you craving to turn the next page. It is also very convenient because it is very easy to read in multiple settings. It is very hard to lose track of what is going on in this book. If you are looking for a good book, typically on the go, and love stretching your brain to new levels, then Freakonomics will not leave you unsatisfied!
Fani
Posted September 29, 2010
As an 18 year old student who doesn't love reading, it is hard to motivate me to spend any time on a book. However, Freakonomics was able to hold my attention through the whole book. I would recommend this book to any of my friends.
The first chapter was very interesting because it talks about cheating, especially with teachers. It is funny to think that many teachers cheat to get what they want. For example, if a school performs well on a test, then that school gets more money. I always thought that only students cheat!
This book also explains that the stuff that we hear from the media and the news is false. For instance, there is a statistic that 1 in every 3 women will be a victim of assault. The truth is that only 1 in every 8 women will be victims. Another "cool" fact is about bad breath. We all hear that Listerine will cure your bad breath, but the books points out that that claim is false. People never cared about bad breath until Listerine came out.
What are you more afraid of, guns or swimming pools? Well, you should be more afraid of pools because more little kids die from pools than guns. 550 children die each year from pools, but 175 children die from guns.
The only thing that I didn't like about the book was the amount of stories. It was hard for me to adjust my mind to a different story every chapter. I think many other people will not like this book because of the facts. You have to be open minded to accept some of the evidence or "reality" that the authors point out. For instance, the chapter about "perfect parents" will offend many parents. The book talks about how a child is affected by how a parent is rather than how he/she acts around his/her kid. For instance, a child will do better if his/her mother is over 30 years old. I could see how that would offend many mothers under the age of 30.
I really think anybody with an open mind would enjoy reading this book.
Overview
These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much heralded scholar who studies the stuff and riddles of everyday ...