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Which 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? How did the legalization of abortion affect the rate of violent crime?
These may not sound like typical questions for an econo-mist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded scholar who studies the riddles of everyday life—from cheating and crime to sports and child-rearing—and whose conclusions turn conventional wisdom on its head.
Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They usually begin with a mountain of data and a simple 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 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 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 Klu Klux Klan.
What unites all these stories is a belief that the modern world, despite a great deal of complexity 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.
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.
Bonus material added to the revised and expanded 2006 edition
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 July 4, 2012
I thought this book was interesting and a fun reead. It offers a fresh perspective on a lot of topics that you wouldn't think are related. The book is fairly well-written, although the authors offer a bit too much detail at times. I liked that it had a practical side that you can apply in everyday life, such as requiring proof and being skeptical.
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.Sisskind
Posted March 28, 2012
I was definitely surprised to find that this book was not so much about economics as it was about everyday life. Even though the book jumped from topic to topic, the connections were clearly stated, and I never felt like I was being overwhelmed with information. The authors did a good job catering to all reading levels, making it a good book for just about anyone. I am really glad that I chose to read this book for my economics class, and I know that I will never think the same way about anything again.
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.Anonymous
Posted March 28, 2012
Prior to reading it, I expected a dull, pure mathematically focused book. Nevertheless, the authors do a great job in combining their respective strengths into a best-seller non-fiction novel that conveys the statistics in a creative, friendly approach. If you have ever wondered what school teachers and sumo wrestlers have in common, or why two children in the same class share the same name, yet each come from a contrasting culture and financial background, then I recommend this book! -AJ Jimenez P.4
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.ellengunn
Posted February 7, 2012
i received this book as a gift when I was 17 and was completely obsessed with it. Five years later, I still consider it a favorite. Freakonomics shows the invisible hand at work while hilariously commentating on fascinating discoveries. I can't think of anyone who shouldn't read this book!
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.Book_SurferMC
Posted October 31, 2011
My mother is an economics teacher, and ever since she discovered the book "Freakonomics", I've been hearing about its humorous studies that would make even me, like economics. In this book, the authors Steven D. Levitt and Stephen J. Dubner, redefine the whole purpose and study of economics. Instead of looking for the obvious and easiest answer, they dig deep and look for the less obvious, but plausible answer. Instead of giving the public the answer they want to hear, they give them the "ugly truth" something that has caused this book to be a huge success, but also controversial.
One study investigated how names can affect your opportunities in life. For example if you have a very obvious black sounding name, will it make you less successful? The authors tested this idea by sending out two sets of identical résumés. One set with a black name the other set with a white sounding name. The set of résumés with the black sounding name received fewer call-backs than the resumes that had obvious white sounding name. This is interesting because it shows how bigotry and racism are still alive in America today. And finally the most shocking study in the book is the one that correlates the drop in crime in the early 1990's to the passage of Roe vs. Wade in the 1970's. Legalized abortion, according to Levitt, is directly related to a drop in crime. Legalizing abortion made it easier for women, especially poor women, to obtain an abortion and prevent unwanted children from being born. Unwanted children have higher rates of truancy, do poorly in school, and are more likely to become criminals. Children of poor, uneducated, unwed teenage mothers are the most likely to grow up to become criminals. If these children are never born, then they cannot commit crimes. He compared states that legalized abortion before Roe vs. Wade and saw that those states crime rates decreased earlier than the rest of the nation. He also noted that states that not only legalized abortion but also made abortion less restrictive saw even greater drops in crime. Although this study may seem morally objectionable, it's difficult to argue with the data.
These studies, and many others that the authors did, are what captivated me while reading this book. I believe that anyone with a sense of humor will love the approach that Levitt takes to answer questions and analyze things that people would never consider. Personally, I think the book is amazing, and everyone should read it because it really makes you pause and think that the causes behind some things you hear are not always true. After reading "Freakonomics" I am now looking forward to taking some economics classes in college. This is a book everyone should read.
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.Anonymous
Posted January 4, 2013
Great book
1 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.BrittanyMBM
Posted December 12, 2012
I really found this book to be great it was so enforming about the simple things in the world that has to deal with economics. I espically loved the section talking about Parenting and naming your child will effect your entire life. I never really believed all that could contributre to my up brining and my familys. The real estate was funny to me because I have someone in my family who is just like that in her own job when she sells homes to people.
1 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.Allison_Peters
Posted January 8, 2012
In the book Freakonomics written by Steven Levitt who is an economist who has a unique way of looking at the world, he explores “ the hidden side of everything” including the drop in crime in the 1990’s, he concludes the it had little to do with what everybody was thinking such as new police tactics, more police on the streets cracking down on crime, or even a better and stronger economy. He reveals that it all began 20 years earlier with one woman from Dallas named Norma McCorvey and that that it was actually her court case years earlier that caused the severe drop in crime: Roe vs. Wade, the court case that legalized abortion. He says that most mothers getting the abortions are low income young women, who would give birth to children who were most likely to become criminals. Since abortion became legal many of these potential criminals were not being born Therefore, creating less crime, hence the substantial drop in the crime rate.
He also explores how the no child left behind act can make teachers cheat by teaching to the test or even changing their students answers to benefit themselves. He also reveals the corruption involved in sumo wrestling. How good parenting has nothing to do with your parenting skills at all, and a name given at birth can determine your child’s future, he provides details of gang drug dealing and how it is almost like a franchise. The further up you are in the gang the more money you make, and everybody aspires to be on the board of directors. He describes how “foot soldiers” or street-salesmen make less than minimum wage and have a 1 in 4 chance of being killed, yet there is a waiting list to become one. He even explains corruption through a story about bagels. I enjoyed reading the book and I would recommend that others read it too.
1 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.Anonymous
Posted December 9, 2009
It was a very interesting and fun book. Some of the information wasn't new to me but it was far from repetitive or boring!
1 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.nima
Posted May 22, 2009
When I first started reading this book, I didn't expect it to be good at all but after reading it more, I was surprised by the information the author provides the readers with. I thought I would be reading a book with mostly statistics and numbers about economy but it's the exact opposite.This book teaches you how incentives can affect people's behaviors and why people act the way they do.It also gives you interseting examples, such as teachers who cheated in order to win bonuses and how abortions caused crime rates to decreae. By reading this book,you will be able to understand more about the strategies that economists and real estate agents use in order to gain profits. Basically The authors relate random real life examples to economy. I would suggest everyone to read this book because it's interesting and informative.
1 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.Anonymous
Posted May 7, 2013
If you have read this book then you know everything there is to know about life.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.JHernandez
Posted March 22, 2013
If you like to see the world adifferent way, this an outstanding book to read. It really makes you look a things very differently...
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Wellington_V
Posted March 22, 2013
This book is not like your typical novel. Levitt and Dubner intriguingly explore the relationship between multiple topics the average person would assume are not related. Using economics and statistics, the authors explain some aspects of society and why these aspects are the way they are.
When reading this book, one will get a lot more out it than expected. Each chapter begins with a question. When beginning to read a chapter, the reader assumes that the chapter will be specific to the question. To reader’s surprise, they will discover and learn much mire than just the answer to the question. Levitt and Dubner did a great job with the flow of the novel. I, personally, was entertained and found the book to be a fairly quick read. I would recommend this book to anyone. I feel that this book has the capability of enriching the mind of whoever reads it.
DpaulDP
Posted March 22, 2013
This book was very entertaining with it's concepts in each chapter as well as the insightful statistics that opens the mind into different perspectives that are realistic.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted March 21, 2013
When i was finished reading this book, i stopped and realized that there is so much more to economics than just numbers. Levitt and Dubner really focus on the subject that can be found in the most obscure places in the world and in the most random situations. Sometimes the truth about things can be frightening, like the section how the strategies of a realtor and doctors. i like how it lets you have a completely different mind set on the life behind economics, because before this book i thought it was just a boring thing that involved stocks.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.mrpenname
Posted March 21, 2013
i thought this book was really interesting and mentally stimulating. Now when im out at a cocktail party for the societys elite ill be able to keep conversation and actually sound smart by quoting things i learned in this book. From beginning to end Levitt and Dubner analyze studies and tease together numbers in a way that leaves you befuddled yet begging for more.
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Posted February 23, 2013
The book is good, the Showtime special is even better!
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.Anonymous
Posted February 2, 2013
The author makes stupid arguments by merging unrelated subjects. Only an idiot would believe this drivel. I regret ever buying this book.
0 out of 1 people found this review helpful.
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Posted January 1, 2013
Good book from front to back.
Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.ivan1
Posted December 9, 2012
I think it helps young people understand how economics effects everyone
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Overview
Which 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? How did the legalization of abortion affect the rate of violent crime?
These may not sound like typical questions for an econo-mist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded scholar who studies the riddles of everyday life—from cheating and crime to ...