Freakonomics Notes:
Chapter 1  School Teachers & Sumo Wrestlers  Daycare Center Dilemma o Fine late parents o Study done in Israel  8 late pick‐ups per week  $3 fine assessed • # of late pick‐ups increased after fine was implemented • Was the fine too low? • Trick: balance the extremes • Substituted the economic incentive for the moral incentive o Parents were buying off their guilt  Blood Donation Example o What happens when you increase the monetary value  Incentives are was Economics like to study o Def: a means of urging ppl to do more of a good thing and less of a bad thing o Three types  Economic • $3 sin tax on cigarettes • A weak incentive for some  Social • Banning smoking in public places • Terribly powerful for most (Scarlet Letter)  Moral • Making the war on terrorism about the ability to sell nicotine.  Who Cheats? o Everyone:  Cheating may or may not be human nature, but it is certainly a prominent feature in just about every human endeavor.  Cheating is a primordial economic act: getting more for less.  7 Million children disappear when parents had to list SSN o Teachers  Chicago Public School System & High Stakes Testing • NCLB (2002) mandates Standardized Testing • Schools with low scores could be shut down o Social Promotion eliminated = 3rd, 6th & 8th graders had to pass ITBS o Ripple Effects: Teachers have incentive to cheat  Teachers who’s students test poorly could be fired  If students do well = paid better, praised, promoted  Teacher cheating is rarely looked for! Hardly ever detected, rarely punished. • How Teachers Cheat o Write the scores on the board o Extra time for students o “Teach to the Test” o Instruct students to fill in black questions o Erase wrong answers & fill in correct answers  How can we detect it? Think like one. •
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Don’t change too many Don’t change everyone’s Select a string of 10 answers Select ½ of your students Focus on the end of the test 700,000 sets of answers analyzed o What does a cheating teacher look like? o Younger, less qualified, after incentives change • Student’s Perspective o Students who have a dramatic spike in test scores. o Students rarely get 6 straight answers correct. o Classes overall performance  6.8 = 6th graders, in the 8th month  4.1, 5.8, to 5.5 o Cheating only leads to future problems for the students • 200 classrooms in all of Chicago’s Public Schools (5%) • Identifying a Good Teacher o Easier questions answered more correctly o Gains carry over to the next grade • Arnie Duncan o Who is he: Chicago native, Harvard Grad, Pro BB player o Allegiance laid with students & families, not teachers & unions Start 5th Hour at: p. 32, 1st paragraph “The Best way to get . . .” #8 (Beginning) o Re‐administered the test to a random sample of classrooms  ½ ‐ suspected cheaters  25% ‐ suspected good teachers  25% ‐ mediocre teachers  No one told why, administered by CPS administrators  Results • Control groups – scores remained constant • Cheaters – scored far worse, full grade level • 12 Cheating teachers were fired • Next year cheating fell by 30% •
o Sumo Wrestlers  Japanese national support • Sport is about honor, supposedly • Sumo’s would never cheat to lose then, right?  Stats • 11 years of data, 32,000 bouts, 281 wrestlers • Ranking is everything o 66 highest ranked wrestlers are “elite”, earn $170,000 o 70th ranked wrestler earn $15,000 o 6 tournaments a year determine their ranking  Winning record, rank improves – Visa, Versa  8th Victory is very important!!!!! • 8‐6 v. 7‐7 wrestlers were compared to id cheaters o Results  7‐7 predicted win = 48.7%  7‐7 actual % = 79.6% • 9‐5 v. 7‐7 o Results  Predicted: 47.2%  Actual: 73.4% • 8‐6 v. 7‐7 the next time they meet o 7‐7 only win 40% o Let me win today, I’ll let you win next time o Arrangements btwn Wrestlers  Allegations of Match Rigging often make the Papers • Two former Sumos come forward with cheating claims o Both die just before press conference o Police “cover‐up”, never investigate o Name‐Names  29 crooked • Stats prove their claim  11 incorruptible  Data suggest most Sumos cheat o Paul Feldman: the guy who brings in the Bagels  Put out bagels & a cash basket • Pay on “your honor” • Was making more money doing this than his regular job  White Collar Crime Data Research • No victim (usually) • Expectations: 95% payment rate • “Honest Companies” – 90% or higher • “Annoying but Tolerable” – 80‐90% • “Unreasonable” – below 80% • Data o 89% payment rate o Smaller firms pay more frequently than Larger firms  Known & caught  Shamed o Weather – pleasant weather = more $$$  Cold/Rain/Wind = less $$$ o Holidays – less $$$  Christmas, Thanksgiving, Valentines, Tax Day  4th of July, Labor Day, Columbus Day = more $$$ o Morale o Execs steal more o Worker bees pay more Lessons Learned  People are generally good without enforcement