Freakonomics
What is Freakonomics?
Freakonomics is a form of economics studied by a few of the many
economists. The books that I am going to be reviewing are based
around this form of economics This may not make
sense in the beginning but will progress to a reasonable statement.
This intro will begin to make more sense as you read the essay. I
will lead you into the world that these two books will present before
you.
The authors behind the
books are Steven Levitt and Stephen Dubner. These two authors started
out as the unlikely combo of journalist and rouge economist. The two
of them together decided to write the first book Freakonomics.
Freakonomics was frowned upon with a claim that there is no main
theme and even worse criticism was given when they proposed that the
name would be Freakonomics. After Freakonomics sold 4 million copies
world wide they couldn't help but publish a second book with similar
qualities and themes like the first. The book posits many
improbabilities that most people wouldn't consider during their
everyday lives. Dubner and Levitt on the other hand decided to delve
even deeper into these areas.
One of the things that
Steven and Stephen delve into are improbable comparisons. The two
kinds of people that you thought you could never compare are suddenly
very similar. The first chapter of Freakonomics is about how teachers
and sumo wrestlers are alike. I was baffled that these two could be
compared at all, but the two brave authors did it and I managed to
understand it. Teachers and sumo wrestlers both are willing to cheat
to appear better and get greater benefits. Money is the incentive. A
Sumo wrestler might cheat to increase his rank and get better pay;
the teacher will do the same thing to be seen as a better teacher and
be paid more for better results from the students.
The sumo wrestlers get
their pay quite like a pyramid scheme. Even though the average sumo
wrestler holds a place filled with respect if you are at the bottom
of the pyramid you have so little money you would most likely live in
a horse stable. While at the top of the pyramid a sumo wrestler would
live like a king. Of course where there is incentive people will
cheat. Sumo wrestlers would throw matches so that two people could
advance. The person that threw the fight would then request that the
other wrestler threw the match next time they met. This way they move
up the pyramid and gain more money to lead a better life.
The teachers have a
harder time cheating. The teachers try to find ways that will stump
the standardized test system. They will do simple things like post
answers on the board or more discreetly filling in the answers after
the proficiency test. They usually use the discreet method of
cheating because if one kid tells an adult they got the answers from
their teachers, the teachers can be removed from the school
permanently. The incentive is recognition and in some cases an
increase in salary. Most of the time salary increases come from
tenure, but in some cases they can get an increase in money by better
standardizedtest results because they are teaching “better”.
Not all of Freakonomics
is comparing people to each other. Levitt and Dubner could also
easily compare people to inanimate objects. Another chapter is why a
terrorist should buy life insurance. Terrorists are people that can
cause chaos all over a country through acts of violence.
How do we catch this menace to society? The answer was found by Ian
Horsely who worked at a bank and found some data that helped with
terrorists immensely. When looking at the data most terrorists don't
have life insurance and other red flags like not using a credit card
or withdrawing large quantities of money all at once. Ian Horsely
devised a system to pick out terrorists in our society. The computer
program wasn't perfect but it worked well and most terrorists
wouldn't have been picked out if Ian had not picked out all of the
red flags.
The chapters I found most
interesting are written about a man known as Sudhir Venkatesh.
Venkatesh studies in some of the worst part of Chicago, where he
observes the inner workings of a crack selling gang. He learned that
the inner system of the crack gang worked much like a pyramid scheme
where the top people earn almost all of the money. The lower ranking
people in the gang earn little to no money at all and struggle to get
to the top of the pyramid. They usually never make it. Using a book
that was being used to record all of the data Venkatesh brought the
data to a rogue economist whose name was Steven Levitt. Together
Venkatesh and Levitt figured out the inner workings of the crack gang
and exposed it all to the world. Venkatesh then went on to work on a
much more touchy subject, prostitution. Most people wouldn't ever be
proud of participating in such work. Venkatesh was working on the
daily life of a prostitute and sent former prostitutes to follow
around the current ones to ask questions about their job. Both
studies led to the conclusion that both crack dealing and
prostitution led to extreme troubles for the people in this line of
work. For the gang there was drive by shootings on the streets. For
the prostitutes there was the risk that they might get ripped off and
could get raped. The risks are so great for the jobs that they almost
aren't worth the effort though as long as there is still demand there
will still be the dirty jobs that most don't want.
Now that I have the
basics down of the book I think that it is about time to get a bit
deeper, including how Freakonomics addresses some
of the more relevant problems. One of those relevant problems is
global warming. We hear about global warming but there is so much
information about it that its hard to discern which facts we should
listen to. An interesting fact about our environment is that our
world that we live in now used to be a lot warmer. The fact that they
state in the book is that we might be doing something right with the
global warming but we are just doing it too fast. I thought that it
would be worth mentioning this specific fact and that we can also
slow things down in a fairly simple way. One of these simple
solutions is to release some small amounts smog into the atmosphere.
This simple solution will cost so little that it would be less money
than is spent on the United
States elections every 4 years.
One of my favorite
chapters other then the ones about Sudhir Venkatesh is another one of
the person to person paragraphs. This chapter was about how a real
estate agent is like the KKK. If you don't know who the KKK is they
are also known as the Ku Klux Klan and were known for their hate for
the people of color and their supporters. During the time that the
Klan was a group they were completely secretive. Most people knew
nothing about the Ku Klux Klan, but what does this have to do with a
real estate agent? The real estate agents job is to sell your house
but how much incentive do they have to actually give you the best
price they continue to promise you. The fact is that the average real
estate agent makes a miniscule profit of 2.5% of the actual selling
price of your house. So when you think about it the money won't
change much if you get the price to raise another $500. Instead of
holding out for the highest bidder they instead encourage you to take
the first offer arguing that there won't be a better offer later. The
overall similarity is the fact that they both gain from keeping
secrets from the people. One keeps secrets for money and one keeps
secrets to remain in power. In many books money and power are
inseparable.
A name is a word that is
assigned to a person and forevermore they are addressed by this word.
A long asked question is how important is a name. Names can be
important but not as important as some of us are willing to think.
For example the book mentions there are two kids, the first kid is
named winner while for some reason the second kid is named Loser.
Loser ends up becoming extremely successful eventually becoming a
very good cop who is loved by many. Winner's greatest achievement is
his rap sheet of the many crimes that he committed. This proves part
of my argument but there is still more. It is also proven that people
with a traditional black name are less likely to get a job then a
person with a traditional white name. Not only does this prove that
there is still plenty of segregation but this also shows that proper
names do help in a person's future.
From the 1970's
to the 1990's there was a large crime boom but around the year 2000
there was a sudden crime drop. When it was thought that criminal
activity would go up the crime rate exponentially dropped. Many
economists proposed several explanations for this sudden drop
including better gun control and the police crack down on crime.
While all of these explanations could help explain a large proportion
of the drop there was much that they were missing. The proposed
explanations for the crime drop only equaled a little better than 50%
in Levitt's opinion. I thought this was quite spectacular but Levitt
proposed 50% was abortion. It makes sense. The kids that would have
become criminals from dealing with the bad neighborhoods, bad
families, and bad friends were not even born in the first place
because they had been aborted.
I
read an article that may have proved something wrong in Freakonomics.
This work was on altruism. The altruism experiments would show that
many college students that were below the age of 25 were not very
altruistic. The first set of experiments consisted of student A being
given $20 who was able to decide to give any amount of money. This
test usually ended with them giving about $6. Another experiment that
was done consisted of two people that had $20 and they could take
money off of each other as well as give money. The second experiment
had the exact opposite effect where student A would take all of the
$20 from Student B and keep it all to themselves. The article I told
you about was how a human brain would not be fully developed until
they were 25 years old. It shows that these experiments in
Freakonomics were not accurate. When these same kids turn 25 years
old they might think completely different due to brain development.
In
conclusion Freakonomics is an extremely fascinating book set that can
take you to places that you wouldn't think of during your average
day. From how sumo wrestlers compare to teachers and how terrorists
would be safer with life insurance. All of the many subjects I have
discussed and more can be found within the 2 outstanding books. Each
chapter different from the last in some way or another. All I can say
right now is that I can not truly give you the full experience that
these book have to offer so I recommend to find them and read them
yourself.
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