Freakonomics: economic incentives and hidden side of human behavior

Freakanomics

Levitt, Steven D. & Stephen Dubner. Freakanomics: A Rouge Economics Explores the Hidden Side of Everything. New York HarperCollins: 2005.

Freakanomics: A Rouge Economics Explores the Hidden Side of Everything by Steven Levitt and Stephen Dubner, began as a column in the New York Times. Even now, Levitt and Dubner continue, on a weekly basis, in column format to answer such perplexing questions as why so many supposedly wealthy drug dealers still live with their mothers, one of the columns that became a chapter in this 2005 text. The authors' book is mainly a catalogue and expansion of some of the authors' more surprising and informative merging of the theoretical and the practical aspects of social theory and economics.

Levitt, an economist and his co-author Dubner team up to analyze issues of social and biological concern and controversy, using the principles of economics to shed light on issues from racism, to children's names and education, to life in the ghetto. For example, consider the idea of economic incentives -- teachers, the authors argue, may have an incentive to 'teach to the test' or even to lie to improve student's test results, rather than honestly report their students' performances on standardized exams. If that is how the teachers are judged as educators, the use of such measures of performance essentially reinforces rather than discourages negative behavior that is harmful to schools, teachers, and students.

Levitt and Dubner look at the world in a way that is both surprising, occasionally funny, and always enlightening, by drawing unexpected theoretical connections between the different but complementary theoretical rubrics of sociology and economics. In answer to the question about the drug dealers, for example, the authors contend that drug dealer's lackeys, rather than being wealthy as is commonly imagined, actually accept an initial salary pittance in exchange for community and social status (hence the fact that most still live at home). This is very much like the reason most interns and individuals taking low-paying entry-level publishing jobs for little money. Their jobs allow these aspiring young people to 'see and be seen' in a world they would not otherwise have access to, such as the White House or an elite firm. Individuals with youth and energy do so with the hope of a much bigger payoff of status and money later on.

Of course, such a payoff may ultimately prove elusive for both the drug deals of the ghetto and the status-hungry intern. It could be noted, this is also quite true of the prospect of movie stardom -- and still many young hopefuls come to Hollywood, filled with the false certainty that despite the odds they will be 'the one' who survives and makes it big, despite their initial hardships. Individuals do not always make career and life decisions according to the mathematical laws of probability or according to strict economic sense, despite the idea that people always go for the biggest paychecks in their working lives. Rather, the individual's perceptions of reality, rather than reality itself can govern his or her vocational choices. It is this same logic in the face of the odds that a young man in the ghetto might use when aspiring to the life of the biggest men on the block, the drug dealers whom he sees as powerful and worthy of respect, according to his own personal worldview.