The Hidden Side of Everything
1) Economics is rarely a favorite subject amongst high school students. Analyzing supply and demand curves and drawing price ceilings are hardly thought of as engaging activities, much less the beginning of a fascinating career. So what can the study of economics do for individuals? We all know how it aides the government in making influential decisions with national expenses. However, how can it help people in their own lives? This is the question that authors Steven D. Levitt and Stephen J. Dubner answer in the book Freakonomics. A strong connection exists between incentives and a person’s behavior in the economic world; with high enough incentives, people are very easily influenced. How is the Ku Klux Klan similar to a group of real estate agents? What makes the “perfect parent”? Why would African-American parents give their child a name that could lessen their chances of getting a honorable job? Through a series of studies, Levitt and Dubner question conventional wisdom and explore the economic patterns that define our society.
2) Steven Levitt received an undergraduate degree from Harvard University and a
PhD in Economics from MIT. Since 1997 he had been a professor of economics at the
University of Chicago. Recently he received the John Bates Clark Medal, awarded every two years to the best American economist under forty. Stephen Dubner is a journalist who currently writes for The New York Times and The New Yorker. He received an MFA from
Columbia University in New York City and went on to teach in their English department.
When the two decided to team up and author Freakonomics, they had a common
interest: although schoolteachers and sumo wrestlers and drug dealers may lie, numbers do not. Everything in the economic world could be explained, whether it be through algorithms or simple observations. Freakonomics is a collection of various anecdotes that revolve around this central idea. By includingthe experiences of many experts, the authors were able to maintain credibility. A perfect example would be the studying of the inner workings of the Ku Klux Klan. Stetson Kennedy, an author and human rights activist, went undercover and joined the Klan to expose their heinous activities. This experience administers an authority to the research because Kennedy actually underwent this process and relayed the story to Steven Levitt. American sociologist Sudhir Venkatesh documented criminal gangs and drug trade by going undercover to study the underground economy.
Both of these actual experiences add a depth to the research that is not easily reached simply through facts and figures. With all of their research credentials in the economics and journalistic fields, Levitt and Dubner make the perfect team to co-write Freakonomics.
3) If morality represents how people would like the world to work, then economics show how it actually does work. Each chapter of this book addresses a singular topic with an opening question. Chapter 1 is titled, “What Do Schoolteachers and Sumo Wrestlers
Have in Common?” It discusses the dark side of cheating-incentives. Who cheats, and how are they caught? Students in Chicago were given an exam that ultimately would showcase the caliber of their teacher’s abilities in education. When they were given the chance, 35% of teachers would change the answers of certain questions on the exam to insure highest scores. In a sumo tournament, wrestlers must win at least 8 out of their 15 matches or they face demotion. The authors studied what would happen in the final match between a wrestler with 7 wins and 7 losses versus a wrestler who was 8-6. Statistically, the 8-6
wrestler has a higher chance of winning since he is technically better. However, the 7-7 wrestler would end up winning 80% of the time. Why is this so? The sumo community is very tight knit, and this data illustrates that an 8-6 wrestler will often let a 7-7 wrestler win because he has already secured his spot in the tournament. It is fascinating to think about the ways in which people are persuaded to cheat. This research exhibits how the majority of the time cheaters cheat for purely personal gain. However, on occasion it could be to aid a friend in need. Does this make it any more justified? Levitt and Dubner argue that it does not. Each chapter of Freakonomics is filled with charts and graphs, but they were put in a simple context as to not overwhelm the reader. By relying heavily on ethos and logos, the authors very clearly justified their opinions.
Chapter 2 opens with the question, “How is the Ku Klux Klan Like a Group of Real
Estate Agents?” This analyzes how experts of any kind are in the perfect position to exploit consumers. Members of the Ku Klux Klan are experts in terror, and wield this power with a vengeance. Knowing exactly what frightens people is one of the best ways to progress in today’s society. Real estate agents, believe it or not, act in a similar manner. They know exactly how to abuse the information they procure. Levitt and Dubner include multiple tables and charts that compare the top ten common real estate terms in advertisements in correspondence to their effectiveness. Realtors often include the more emphatic descriptive words when selling their own home or a home on which they will receive a high commission. By having full reign of a certain sector of knowledge, experts can manipulate people efficaciously.
Chapter 4 contains the most controversial idea of the entire novel. The authors establish the concept that the legalization of abortion in the United States lead to a steady decline in crime rates. They believe the majority of mothers who seek abortions are not willing to put the time and effort into raising a child safely to become a stable adult. Levitt and Dubner believe that a woman who seeks to terminate an unwanted pregnancy could be too young, unmarried or in a bad marriage, too poor to support a child, or have drug or alcohol issues that would harm the fetus. All of these reasons and hundreds more can influence a mother to feel she cannot provide a home environment that is conducive to raising a healthy and productive child. Males ages 18-24 are most likely to commit crimes.
A sharp decrease in crime began in 1992, 19 years after abortion was legalized. Dubner and
Levitt strengthen this chapter by including multiple small questions and providing detailed answers. Each paragraph begins with a common inquiry that an average person may have regarding the topic, such as “What sort of woman was most likely to take advantage of Roe v. Wade?” By addressing possible counterpoints, the authors actually strengthen their own point of view. They also strengthen their entire argument of the idea that it only takes asking the right questions to achieve desired answers. Many authors criticized this study, claiming that Dubner and Levitt did not analyze the factors that played a role in the decrease of crime.
4) An article in The Economist cited two economists from the Federal Reserve Bank of Boston who found a hole in the evidence that abortion and crime are directly linked.
They state that multiple factors that have an effect on crime but cannot be observed directly were not included. An example would be the crack epidemic. There should be a strong difference in the 20 year old generation and the 18 year old because one group was
born before the legalization of abortion and one was after. Jon E. Hilsenrath from The Wall
Street Journal said that a programming oversight was made. He said that arrests should have been tabulated on a per-capita basis, as opposed to an overall count. The Boston Fed’s
Mr. Foote stated, "There are no statistical grounds for believing that the hypothetical youths who were aborted as fetuses would have been more likely to commit crimes had they reached maturity than the actual youths who developed from fetuses and carried to term."Joe Donohue of Yale University agrees with Levitt in his essay, “The Impact of
Legalized Abortion on Crime.” He specifically mentioned the fact that the five states that legalized abortion before the rest of the nation experienced faster drops in crime rate. In his paper he states that legalized abortion appears to count for 50 percent of the drop in criminal activity.
Truthfully, no one will argue that incentives do not matter. For this reason, there are no direct counterpoints made against the central theme of this book. However, there are some people who believe that incentives do not always make people respond in the anticipated manner. Samuel Bowles of The Harvard Business Review cited a study completed by Richard Titmuss concerning a blood drive. The results found that when donors were offered a monetary incentive to give blood, it had a reverse affect and less people were willing to donate than usual. This is because incentives are not effective when they undermine what Adam Smith called the “moral sentiments.” Rewarding blood donors makes them seem less altruistic and instead greedy.
5) In conclusion, it is difficult to reasonably argue that incentives do not strongly affect the way people make choices in their lives. Incentives affect the way we are
. perceived in society, and what values are important to us. Is it worth being on top if you cheated to be there? There are a number of widespread opinions about this. Does being an expert give you the right to manipulate the incentives of others? It all depends on personal experience. The study of incentives certainly aids us all in understanding what we want and how to achieve it, but it does not provide the answer to every question we have. The modern world, despite how complex and intricate it may seem, is not unknowable. If the right questions are asked, it can become even more intriguing.
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