Freakonomics: A Rogue Economist Explores the Hidden Side of Everything


Revision as of 11:16, 12 November 2006 by (Talk) (Chapter 4: Where Have All the Criminals Gone?)

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
Author Steven D. Levitt, Stephen J. Dubner
Country United States
Language English
Genre(s) Crime
Publisher William Morrow
Released April 12, 2005
Media Type Hardback & Paperback
Pages 336 p. (hardback edition)
ISBN ISBN 0061234001 (Hardback), ISBN 006089637X (large print paperback)

blog comments powered by Disqus

Economics is often regarded as the study of dry, uninteresting financial trends and market developments, but Steven Levitt’s groundbreaking work in the field reveals that the tools of economic research can be put to use in the study of the relationships that underlie the events and problems that we encounter and hear about every day. In Freakonomics, Levitt and his co-author, journalist Stephen Dubner, offer a survey of some of the most interesting research topics Levitt has tackled during his career.

The first chapter defines economics as being, at root, nothing more than the study of incentives and how they are pursued. Sometimes a particular set of incentives is so irresistible that people are driven to attain them through unscrupulous behavior. The authors undertake a study of several prominent instances of cheating. In each instance, Levitt devised a way of analyzing data to detect not only the presence of cheating, but also some of the patterns and incentives that may have served to compel the cheaters to act unethically. The cases that are afforded the most attention include the Chicago public school teachers who changed answers on their students’ high-stakes standardized tests and Japanese sumo wrestlers who conspired to throw certain high-stakes matches.

Chapter 2 centers on the theme of information and the way that individuals, organizations, and businesses often exploit their access to crucial information at the expense of others. First, the authors describe the way that journalist Stetson Kennedy exploited information to help bring about the downfall of the Ku Klux Klan. Then, Levitt’s research on the actions of real estate agents offers another perspective to the discussion. His analysis of real estate data found that agents behave quite differently when the homes they are selling are their own. A few other examples of applications of information asymmetry are also described.

In Chapter 3, Levitt offers an in-depth discussion of the economic workings of a Chicago drug gang, shattering the common misperception that all drug dealers are wealthy. His analysis of the financial records of a Chicago gang proved that most street-level dealers earned far less than minimum wage. He turns to the socioeconomic context of most gangs for an explanation of the incentives that compel young men to become drug dealers.

Chapter 4 sets forth what is arguably Levitt’s most controversial finding: his research revealed a strong link between the legalization of abortion in the United States in 1973 and the sharp decline in violent crime that the nation experienced in the mid-1990s. He bolsters the credibility of this claim by demonstrating that most other explanations for the crime rate drop are untenable.

Chapters 5 and 6 both address various aspects of parenting and the way that parents’ status, choices, and actions can impact their children’s life outcomes. First, Levitt details the outcome of his study of the safety of backyard swimming pools, which found that children are 100 times more likely to drown in a backyard pool than they are likely to die while playing with a gun. Then, he summarizes the findings of a series of studies about parenting practices, all of which suggest that parental socioeconomic status is a more reliable predictor of high academic outcomes in children than most other parenting practices that are commonly recommended by experts, such as reading books to your children. He then turns to the study of children’s names; specifically, the different economic impacts of “white” versus “black” names. Levitt concludes with a discussion of the patterns that govern the popularity of children’s names in the United States.

Chapter Summaries

Introduction: The Hidden Side of Everything

In this introductory chapter, co-author Stephen Dubner offers an overview of the diverse and seemingly unrelated topics that renowned economist and co-author Steven Levitt has addressed in his body of research. The authors state that there is no unifying theme of the book, although the aim throughout is to explore the hidden side of things and the subtle relationships that link everyday phenomena.

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

They cheat because of incentives

Chapter 2: How is the Ku Klux Klan like a Group of Real-Estate Agents?

Information destroys all

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

because only the board of directors live wealthy lives while the drug dealers get less than minimum wage

Chapter 4: Where Have All the Criminals Gone?

from the world to the US

Chapter 5: What Makes a Perfect Parent?

Several years before Freakonomics was published, author Steven Levitt lost his infant son Andrew to a sudden, fatal bout of pneumococcal meningitis. In the aftermath of this tragedy, Levitt and his wife became active in several support groups for bereaved parents. Even as he sought help and guidance for the terrible loss, Levitt noticed the disproportionate number of parents in the groups whose children had drowned in backyard swimming pools. This prompted him to research the issue, as well as a number of other aspects of parenting, from an economic point of view. His research uncovered the high risk of allowing children to play in swimming pools: Levitt estimates that a child is more than 100 times more likely to die in a swimming pool than playing with a gun.

In a series of subsequent articles, Levitt explored other facets of parenthood and their outcomes. He determined that in spite of the cottage industry of parenting and the millions of how-to books on the subject sold every year, who you are matters much more than what you do. In other words, positive parenting outcomes are linked more strongly to factors such as socioeconomic status and parental education than any specific parenting practices. Factors that are important in determining high standardized test scores in children include: highly educated parents, high socioeconomic status, maternal age of greater than thirty when the child was born, low birth weight, English as the primary language spoken in the home, parental involvement in the PTA, and many books in the home environment. Also, adopted children tended to have higher standardized test scores than their non-adopted peers.

Chapter 6: Perfect Parenting, Part II, or: Would a Roshanda by Any Other Name Smell as Sweet?

In this chapter, the authors extend the discussion of parenting with an overview of more economic aspects of parental choices. Specifically, they focus upon the economic implications of children’s names, especially the overtly ethnic African-American names that have become common over the last several decades. The authors tied this issue to a larger question about contemporary black culture in the United States: is distinctive black culture merely a reflection of the economic gap between whites and blacks, or has it actively caused the gap to widen?

Using several decades of name data drawn from California birth certificate records, Levitt’s analysis revealed a number of interesting trends. The authors cite previous research that has shown that similar résumés with white and distinctively black names result in job offers being extended to the white-sounding applicant far more frequently than the black-sounding applicant. Among other things, it was determined that having a distinctively black name was linked to lower attainment and negative life outcomes in terms of employment, income, and education.

Levitt then turned to the question of how names become popular among white Americans. In addition to the general trend of increasingly unique names for white children, Levitt describes a pattern by which highly educated parents popularize obscure names, gradually compelling the names to achieve broader popularity. Finally, after a period of several years, white parents from lower socioeconomic classes adopt the names, prompting a selection of new names among highly-educated white parents, and the repetition of another cycle.

Epilogue: Two Paths to Harvard

The life paths of two Harvard graduates who may have seemed to be locked into divergent patterns of achievement based on their backgrounds are outlined. Ted Kaczynski, also known as the Unabomber, came from a privileged background and had access to all of the resources that are typically correlated with success, whereas Roland G. Fryer, an African-American man who was raised in an impoverished, unstable family environment, is now a promising Harvard economist. The book ends with this brief reminder that there are limits to the ability of economic analysis to predict every possible outcome.

Important Quotes

External Links

Wikipedia's entry