Freakonomics – Steven D. Levitt and Stephen J. Dubner

photoBook Description (Amazon): Which is more dangerous, a gun or a swimming pool?

What do schoolteachers and sumo wrestlers have in common?

How much do parents really matter?

These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He studies the riddles of everyday life—from cheating and crime to parenting and sports—and reaches conclusions that turn conventional wisdom on its head.

Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They set out to explore the inner workings of a crack gang, the truth about real estate agents, the secrets of the Ku Klux Klan, and much more.

Through forceful storytelling and wry insight, they show that economics is, at root, the study of incentives—how people get what they want or need, especially when other people want or need the same thing.

My Review (Spoilers!):

Executive Summary: interesting

So this was the first audio book that I have ever listened to. In many ways, it was great. I listened to it while running, and because it’s chock full of information, I paid more attention to the book and less attention to my aching body (I’m the sort of person who is whining after 10 steps). However, the downside is that because the book is so chock full of information, there are times where an audio book can be a bit tedious like at the end when tables full of names are being read. Luckily, I also own this book in hard copy, so I can reference it as needed. The book was co-authored by the economist who came up with the data for the book and a journalist who helped make it more palatable. (The journalist was also the speaker for the audiobook).

I am not an economist, so I think the best way for me to review this book is to briefly discuss the points that are made, and if you don’t believe me, you will just have to read the book to get the background information that justifies them. And some of these topics are VERY surprising.

In the introduction, many of the points that will be discussed in detail in the book are presented. Unfortunately, I didn’t really like this, because I think it made the discussions about the points less shocking when they occurred.

Crime in the 1990s was terrible. Experts believed that the crime was only going to continue getting worse and worse. However, by 2000, the overall murder rate in the US had fallen to its lowest level in 35 years. Many theories were suggested for the drop in crime–gun control laws, police strategies, etc. However, the real reason for the drop in crime had occurred more than 20 year earlier. Roe vs. Wade. Yes, that is correct. The ability to have abortions was the main contributor to the drop in crime.

Is a real estate agent worth getting to help you sell your house? You would think so. They are more knowledgeable about the market than you are. However, in reality real estate agents list someone else’s house for an average of 10 days less than their own, and they sell their own houses for an average of 3% more. The reasoning behind this is that the amount of increase in their cut of the sale price is so minimal that it makes no difference to them.

Money buys elections, right? Actually statistically, money does not matter. What matters is how appealing the candidate is to voters.

What do school teachers and sumo wrestlers have in common? According to the book, they both cheat. Well, ok, not all of them, but some of them definitely do. And there are ways of determining who and how. Teachers cheat on standardized tests. Sumo wrestlers throw some of their matches to allow some of the others to make it to the upper echelon (there is a huge disparity between being top tier and middle tier). This is all tied to incentives. In many places, teachers receive a bonus for getting good test scores in their classes (and like I mentioned, the sumo wrestlers have a major incentive too). There are many examples of the benefits and drawbacks to incentives. For instance, in the 1970s, researchers began to offer a small stipend for blood donors. What happened? less people donated blood. In 1987, seven million American children instantly disappeared. The IRS started requiring social security numbers for dependents on tax forms. Providing an adequate incentive without it being abused is walking a fine line indeed.

The next section is about the KKK. And honestly I’m almost tempted to not discuss it at all. It’s so worth learning about yourself. So I guess you’ve been warned. Skip this section if you want to read it yourself. You won’t regret it. The KKK was formed after the Civil War, and was fairly dormant until 1915 when a book was written which promoted its agenda. It became hugely popular (8 million members including President Warren Harding) but waned again in WW2. Post-war, however, it began to rise again in popularity. A Jacksonville man named Stetson Kennedy (related to those who made Stetson hats) was unable to fight in the war, but wanted to wage his own war against bigotry after his childhood black nanny was raped by a group of Klansmen. He decided to infiltrate the Klan to spy. One day he saw some children playing a spy game where they had secret passwords, and an idea was made. Stetson contacted the producers of the Superman radio show (aired nightly) who loved his idea. (Superman has always fought against America’s enemies but after WW2, he was fairly light on work.) Stetson fed the Superman producers details including passwords, positions, etc. which they wrote into their episodes. (The Klan structure is such that the top dog is called the Imperial Wizard. Below him, a Grand Dragon. Below that, a Great Titan. All officer positions began with Kl, i.e. Klaliff, Klokard, Klabee, etc. So without any work, the Klan was silly enough to easily write into the show). The Klan membership fell dramatically. Despite debilitating the Klan, Stetson Kennedy always felt that his most influential idea was the idea of “Frown Power”–encouraging people to frown when they heard a bigoted speech. 🙂

The book now ties back to the real estate market discussed in the introduction segued in by the power of information. Information is what brought down the Klan. Information, or so we believe, is why we hire real estate agents. The main interesting tidbit from this section is the ten common real estate terms: fantastic, granite, spacious, state-of-the-art, !, corian, charming, maple, great neighborhood, gourmet. The five that correlate to a higher sales price are: granite, state-of-the-art, corian, maple, and gourmet. The other five correlate to a lower sales price. In summary, don’t use generic adjectives in your listing. Buyers tend to assume the worst.

Jumping to a completely different topic, the book now turns to why drug dealers still live with their moms. The reason is not hard to guess if you know that drug dealing is regarded as a business operation. Just as in any business, the people at the top make the most money, and the people at the bottom make the least. However, the way that a drug dealing business works is that the people at the bottom do the most dangerous work and the people above all get a cut of what they bring in which leaves a huge disparity between the top and the bottom, aka a pyramid scheme. Additional information gleaned from this chapter: crack dealers have a 1 in 4 chance of being killed (you are better off being on death row), and black Americans have been hurt more by crack than any other single cause since Jim Crow. Yikes.

Jumping back (this book seriously jumps a lot) to one of, if not the most controversial topics of the book–that crime in the 1990s was reduced because of the availability of abortion. The chapter begins in Romania. In 1965, Nicolae Ceauşescu became the dictator of Romania and made abortion illegal. Previously to this, Romania had had one of the most liberal abortion policies in the world. Obviously Ceauşescu wanted to strengthen the numbers of his tiny Romanian warforce as he also banned contraception and sex education. The plan worked, in theory, as the birth rate doubled in just one year of the abortion ban. However Ceauşescu’s plan was short sighted. These children had limited food, education, etc. and as time went on, the children eventually (1989) rose up against Ceauşescu forcing him to flee. He and his wife were captured and executed. The children of the uprising were mostly between ages 13-20 and may not have even existed to oppose him if Ceauşescu had left the abortion laws as they were. In the United States, an opposite trend was happening. The mothers who knew they were not in situations where they would be able to provide appropriately for their children had abortions thus eliminating future juvenile delinquents. This is statistically backed in the book. I realize it’s a hard thing to believe regardless of your views about abortion. However, the book does provide a bit of a thought exercise as to whether or not abortion is worth the drop in crime. In my opinion, less people would have abortions if they believed that the child would be taken care of–either by them or by another family (not in foster care forever). However, until we as a society figure that out, I think that there will continue to be abortions.

Tying onto that, if babies are born, what are parents supposed to do with them? Obviously you fret over them, get them into the very best schools, and put them into every activity possible. Right? …right? I don’t have any kids, but most of my friends do. (And honestly after reading this section of the book, I may consider it 😉 ) So anyway, I know that the parenting information is all over the board. This chapter points out that most of it…doesn’t really make an iota of difference. Basically it’s fear mongering (one of my absolute biggest complaints about our society). Parents want to keep their children safe and smart, so they will do everything it takes. Obviously bad parenting makes a large difference in society as referenced in the abortion study, but how about good parenting? It’s hard to measure personality or creativity, so those are neglected from the book. The book’s study is solely based on school performance. The book lists out 8 factors which are strongly correlated to test scores and 8 factors that are not.

Factors that are correlated:
The child has highly educated parents (+)
The child’s parents have high socioeconomic status (+)
The child’s mother was 30 or older at the time of the first child’s birth (+)
The child had low birthweight (-)
The child’s parents speak English in the home (+)
The child is adopted (-)
The child’s parents are involved in the PTA (+)
The child has many books in his home (+)

Factors that are not correlated:
The child’s family is intact
The child’s family recently moved into a better neighborhood
The child’s mother did not work between birth and kindergarten
The child attended head start
The child’s parents regularly take him to museums
The child is regularly spanked
The child frequently watches television
The child’s parents read to him nearly every day.

Let that sink in. Basically nature >>> nurture. And the reason that I said maybe I should re-consider having a child? My husband and I meet all the + (pre-baby) characteristics. According to this, we could basically have a baby, do nothing else, and that child would do at least above average on test scores.

The last section of the book is in regards to naming said baby. While it is somewhat interesting, it’s also very tedious. You’ll have to read it yourself.

Verdict: 4 stars. Really ~3.75.

I enjoyed this book. The studies were all very surprising, and the data to back them up was strong but also interesting. I wished that there had been a bit more cohesion throughout. I thought that the underlying points about information and incentives was very useful to ponder, and the authors could have probably used these points to tie together the entire book if they had chosen to. I also wished that the introduction had not given the conclusions of the studies that it listed. I realize that it was trying to entice the reader, but I think that it went too far–making those sections less interesting when I got to them. All in all though, it was an interesting read, and I did learn that I should list my own house when I want to sell it!

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Filed under 4 stars, Book Review, Books

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