Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything


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Steven D. Levitt and Stephen J. Dubner offer the long-awaited paperback edition of Freakonomics, the runaway bestseller, including six Freakonomics columns from the New York Times Magazine and a Q & A with the authors.

Which is more dangerous, a gun or a swimming pool?
What do schoolteachers and sumo wrestlers have in common?
How much do parents really matter?

These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He studies the riddles of everyday life—from cheating and crime to parenting and sports—and reaches conclusions that turn conventional wisdom on its head. Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They set out to explore the inner workings of a crack gang, the truth about real estate agents, the secrets of the Ku Klux Klan, and much more. Through forceful storytelling and wry insight, they 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.

Product Details

ISBN-13: 9780060731335
Publisher: HarperCollins Publishers
Publication date: 08/25/2009
Series: P.S. Series
Pages: 352
Product dimensions: 7.80(w) x 5.20(h) x 1.00(d)

About the Author

Steven D. Levitt, a professor of economics at the University of Chicago, was awarded the John Bates Clark Medal, given to the most influential American economist under forty. He is also a founder of The Greatest Good, which applies Freakonomics-style thinking to business and philanthropy.

Stephen J. Dubner, an award-winning journalist and radio and TV personality, has worked for the New York Times and published three non-Freakonomics books. He is the host of Freakonomics Radio and Tell Me Something I Don't Know.

Stephen J. Dubner is an award-winning author, journalist, and radio and TV personality. He quit his first career—as an almost rock star—to become a writer. He has since taught English at Columbia, worked for The New York Times, and published three non-Freakonomics books.

Read an Excerpt

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 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 ...

The foregoing is excerpted from Freakonomics by Steven D. Levitt and Stephen J Dubner. All rights reserved. No part of this book may be used or reproduced without written permission from HarperCollins Publishers, 10 East 53rd Street, New York, NY 10022

Table of Contents

An Explanatory Note xxiii

In which the origins of this book are clarified.

Introduction: The Hidden Side of Everything 1

In which the book's central idea is set forth: namely, if morality represents how people would like the world to work, then economics shows how it actually does work.

Why the conventional wisdom is so often wrong

How "experts"—from crimnologists to real-estate agents to political scientists—bend the facts

Why knowing what to measure, and how to measure it, is the key to understanding modern life

What is "freakonomics," anyway?

Chapter 1 What Do Schoolteachers and Sumo Wrestlers Have in Common? 15

In which we explore the beauty of incentives, as well as their dark side-cheating.

Who cheats? Just about everyone

How cheaters, cheat, and how to catch them

Stories from an Israeli day-care center

The sudden disappearance of seven millon American childern

Cheating schoolteachers in Chicago

Why cheating to lose is worse than cheating to win

Could sumo wrestling, the national sport of Japan, be corrupt?

What the Bagel Man saw: mankind may be more honest than we think

Chapter 2 How Is the Ku Klux Klan Like A Group of Real-Estate Agents? 51

In which it is argued that nothing is more powerful than information, especially when its power is abused.

Spilling the Ku Klux Klan's secrets

Why experts of every kind are in the perfect position to exploit you

The antidote to information abuse: the Internet

Why a new car is suddenly sorth so much less the moment it leaves the lot

Breaking the real-estate agent code: what "well maintained" really means

Is Trent Lott more racist than the average Weakest Linkcontestant?

What do online daters lie about?

Chapter 3 Why Do Drug Dealers Still Live with Their Moms? 85

In which the conventional wisdom is often found to be a web of fabrication, self-interest, and convenience.

Why experts routinely make up statistics; the invention of chronic halitosis

How to ask a good question

Sudhir Venkatesh's long, strange trip into the crack den

Why prostitutes earn more than architects

What a drug dealer, a high-school quarterback, and an editorial assistant have in common

How the invention of crack cocaine mirrored the invention of nylon stocking

Was crack the worst thing to bit black Americans since Jim Crow?

Chapter 4 Where Have all the Criminals Gone? 115

In which the facts of crime are sorted out from the fictions.

What Nicolae Ceauşescu learned—the hard way—about abortion

Why the 1960s was a great time to be a criminal

Think the roaring 1990s economy put a crimp on crime? think again

Why capital punishment doesn't deter criminals

Do police actually lower crime rates?

Prisons, prisons everywhere

Seeing through the New York City police "miracle"

What is a gun, really?

Why early crack dealers were like Microsoft millionaires and later crack dealers were like

The superpredator versus the senior citizen

Jane Roe, crime stopper: how the legalization of abortion changed every-thing.

Chapter 5 What Makes A Perfect Parent? 147

In which we ask, from a variety of angels, a pressing question: do parents really matter? 147

The conversion of parenting from an art to a science

Why parenting experts like to scare parents to death

Which is more dangerous: a gun or a swimming pool?

The economics of fear

Obsessive parents and the nature-nurture quagmire

Why a good school isn't as good as you might think

The black-white test gap and "acting white"

Eight things that make a child do better in school and eight that don't

Chapter 6 Perfect Parenting, Part II; or: Would a Roshanda By Any Other Name Smell As Sweet? 181

In which we weigh the importance of a parent's first official act-naming the baby.

A boy named Winner and his brother, Loser

The blackest names and the whitest names

The segregation of culture: why Seinfeld never made the top fifty among black viewers

If you have a really bad banem should you just change it?

High-end names and low-end names (and how one becomes the other)

Britney Spears: a symptom, not a cause

Is Aviva the next Madison?

What your parents were telling the world when they gave you your name.

Epilogue: Two Paths to Harvard 209

In which the dependability of data meets the randomness of life.

Bonus Matter 213

"The Probability That a Real-Estate Agent Is Cheating You..." 215

Selected "Freakonomics" Columns From The New York Times Magazine 233

A Q&A with the Authors 261

Notes 269

Acknowledgments 295

Index 297

What People are Saying About This

Kurt Andersen

“Freakonomics is politically incorrect in the best, most essential way.... This is bracing fun of the highest order.”

Malcolm Gladwell

“Steven Levitt has the most interesting mind in America... Prepare to be dazzled.”

Reading Group Guide

About the Book

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? 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:

  1. Most people think of economics as a dry subject matter concerning monetary and fiscal matters. How does Freakonomics change this definition?

  2. Freakonomics argues that morality represent the way we'd like the world to work, whereas economics can show how the world really does work. Do you agree?

  3. Freakonomics lists three varieties of incentives: social, moral, and financial. Can you think of others?

  4. Freakonomics shows how the conventional wisdom is often shoddily formed. What are some instances of conventional wisdom that you've always doubted?

  5. Does it seem as though "experts" truly hold too much power in the modern world, or are we lucky to have them?

  6. What are some issues in your daily life toward which you can apply some Freakonomics-style thinking?

  7. What were some of the most convincing arguments put forth in Freakonomics? What were some of the least convincing?

  8. How does the argument linking Roe v. Wade to a drop in crime change your thinking about abortion?

  9. How does the view of parenting in Freakonomics jibe with your own view?

  10. After reading Freakonomics, do you think that cheating is more prevalent or less prevalent than you thought it was before you read the book?

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.


A Message from the Coauthor

Steven Levitt doesn't think like you and me. (Well, I can't vouch for you, but I can vouch for me.) He has a brain that seems to hum along on its very own frequency. He can look at some scenario -- the rise and fall of crime, the real-estate market, the modern obsession with competitive parenting -- and instantly begin to ask questions, and come up with answers, that are simply astounding. In retrospect, you may scratch your head and say, "Why didn't I think of that?" This is what makes his work so intoxicating: He answers the questions we haven't yet figured out how to ask.

Yes, it's true that Levitt is an economist. But never before has the so-called dismal science been given a less dismal presentation. As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients' best interests at heart? Why do black parents give their children names that may hurt their career prospects? Do schoolteachers cheat to meet high-stakes testing standards? Is sumo wrestling corrupt?

Levitt works with data, mountains of it, and from his data he teases out stories that are often surprising and may even make us uncomfortable, but which are most likely true. Several years ago, for instance, he wrote a paper linking Roe v. Wade with a drop in crime. His thinking went like this: the women most likely to seek an abortion in the wake of Roe v. Wade -- poor, single, or teenage mothers -- were the very women whose children, if born, have been shown most likely to become criminals. But since those children weren't born, crime began to decrease during the years they would have entered their criminal prime.

Unlike a politician or a theologian or a paid pundit, Levitt is free to come up with answers based on nothing more complicated than the truth. Morality, it could be argued, represents the way that people would like the world to work -- whereas economics represents how it actually does work. 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 one might think. All it takes is a new way of looking. Stephen J. Dubner

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