Freakonomics to some, from first look, would be considered another boring economics book. But in reality it is far from it. It is an innovative look on how economists view the world.. I learned so much in relation to the way the world works. I enjoyed the readings because they offered insights the "merit pay debate" for public school teachers, an area I was not too familiar with. Regardless of whether you have to read this book or not, it is definitely worth looking into if only to learn more about economics.
Authors Steven D. Levitt and Stephen J. Dubner examine in chapter one of Freakonomics how incentives may achieve the opposite of what they are designed for. They use the comparison of sumo wrestlers and teachers to help explain their point. The chapter goes on to state that teachers, specifically public school teachers, through the incentive system, have been enticed into cheating in order to receive bonuses for their students good scores on standardized tests. The incentives also have a negative impact in that if the students produce bad scores on the standardized tests, the teachers may face job loss along with no bonus.
Incentives in this case do more harm than good. Instead of students learning more and achieving high scores through hard work and effective teaching, are achieving high scores through cheating and learn little to nothing in the process. One issue with this chapter is the failure of the authors to suggest a sure fire way to prevent negative actions brought on by incentives besides inclusion of a state representative to administer and monitor the test. Another way schools can minimize incidences of cheating is by not permitting teachers to administer the test to their own students. In relation to sumo wrestlers, they are behaving in the same way as the teachers with the difference being rigging matches.
The way it works is, sumo wrestlers belonging to a group help each other win matches. This is because the more you win, the more you earn. The way it works is one wrestler from the same "table" is on the precipice of falling from said table and the other, the opponent, is on the brink of joining the elites, so when they fight, the one who is about to join the elite purposely loses the match so the less effective wrestler still retains his pay and status. The better wrestler stands to lose nothing overall, while the less effective wrestler stands to gain everything. Although it is implied this kind of activity happens within the sumo wrestling world, little proof exists.
Chapter Two, talks about the lack of consumer awareness over information possessed by companies and how companies use this "secret information" to generate additional profits/success. They state how individuals, organizations, and businesses, will often utilize their access to consumer information to gain money and success, all while ignoring the possible consequences to the affected consumers. Industries who use this information have also provided the catalyst to several significant historical events as a result of the inequality in the flow of information. Levitt and Dubner use the example of the man who aided in debilitating the racially prejudiced Ku Klux Klan by extensively publicizing their secret language, or secret vernacular.
The man was Stetson Kennedy. The manner in which he acquired the information was through joining the group during World War II and recording the secret rituals and codes pertaining to the Ku Klux Klan during his time with them. He handed the written information over to Hollywood writers, who used the information to form a storyline on the Superman radio program. Kids throughout America copied what they heard on the shows and implemented it in their games.
Levitt and Dubner also took a look at the real estate industry and the behavior of real estate agents. They researched their common practices when selling client houses and selling their own houses. They discovered that real estate agents use different resources and methods when selling their own houses in order to make more profit, suggesting that consumers can help themselves much like the real estate agents, by looking up the information and applying these techniques in their own endeavors. In Chapter three of the book, the authors examine possible reasons why drug dealers sometimes still live with their parents.
It is a common belief that drug dealers live the "high life" and earn a large amount of money. Levitt and Dubner uses research from Venkatesh, a sociologist from Chicago to dispute this widely accepted belief. Venkatesh performed a series of field studies in downtown Chicago. In these field studies, Venkatesh joined an inner city gang. While in the gang, he was able to examine and analyze the gang's financial dealings.
The information taken from Venkatesh's research was then compared to how a corporation, like Mcdonald's paid their employees. Just like the corporation, the gang has big players that behave in the same way as McDonald's CEO's. They make the most money from the gang's illegal activities and have the most control over who receives what. After a close look at the financial information derived from the gang, the authors discover the average drug dealer makes less than minimum wage.The minimum wage workers, or the drug dealers, make the least amount of money from said illegal activities and therefore explains why some have been known to still live with their parents. If this information were made available to prospective drug dealers, they would know that they stand to make more from flipping burgers at Mcdonald's than selling drugs. (Hilarious if you think about it.)
Chapter Four's title: "Where Have All the Criminals Gone?" offers a great way to introduce the most interesting chapter of the book. Levitt and Dubner offer a link to the declined crime rate and the Roe v. Wade decision by the Supreme Court. The authors explain if the Roe v. Wade decision would have made abortions illegal, crime rates would have skyrocketed. They state that women who abort typically do not have the means to take care of a child and if they had to raise one, that child would then most likely commit a crime. They explain that women, who decide to abort, do so in the best interest of themselves and the baby. Statistics show children that live in a single parent household have higher risk of committing criminal offenses.
They also contrasted this link with evidence from the policies from former Romanian dictator Nicolae Ceau-escu: "Compared to Romanian children born just a year earlier, the cohort of children born after the abortion ban would do worse in every measurable way: they would test lower in school, they would have less success in the labor market, and they would also prove much more likely to become criminals" (Levitt & Dubner, 2005, p. 118). They stated that the abortion ban led to doubling of birth rates and increase in overall criminal activity. It is quite a complex subject to analyze taking into consideration the typical economic status of women who seek abortions and the limited resources available to children born into single parent households. This chapter at least offers some insight into what role certain legal actions play in crime rates.
Chapter Five was the most difficult to understand. Levitt and Dubner examine what it takes to be perfect parents. They state that "perfect parents" have high socioeconomic status and are highly educated. There is some truth to it as children from high income homes have more stability, but there are many exceptions to this. In reality even if children come from parents who are well off and well educated, it does not mean they are better behaved and grow up to be outstanding citizens. Discipline and a stable environment leads to healthy children,…