Brief synopsis (Goodreads): Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? How did the legalization of abortion affect the rate of violent crime?
These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded scholar who studies the riddles of everyday life—from cheating and crime to sports and child-rearing—and whose conclusions turn conventional wisdom on its head.
Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They usually begin with a mountain of data and a simple question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: freakonomics.
Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.
Rating: Island collection
Long story short: One of my courses this quarter is “Economics for Policy Analysis and Management”. Since the last time I took an economics class was back in high school, I decided to prep by watching an Introduction to Microeconomics course from MIT. Though often referred to as a “dismal science”, I found it pretty exciting, and it quickly became apparent that for the most part economics is an intuitive subject; I already knew more about it than I thought I did simply by having paid attention to the world around me.
While shopping for some school textbooks at the campus bookstore I came across a used copy of Freakonomics. I had heard of it before, I had even borrowed it from a friend, but never managed to get it off the back burner. Now that my curiosity was piqued, I quickly picked it up.
Freakonomics is a great read not because it breaks down complex economic theories—though it does do that—but because its goal is simply to get you to ask more questions about the world. The various scenarios all have at least one thing in common: they were responses to curious questions.
For example, how are real estate agents like members of the Ku Klux Klan? Doesn’t seem like they’d have anything in common, but turns out both use information asymmetry to their advantage. Information asymmetry simply means that in a given transaction, one party knows more or has better information than the other. In the case of real estate agents, they know more about selling houses than their clients (otherwise why would you hire one?). They use that information to their advantage: when selling a client’s home they often encourage them to take the first decent offer; however when selling their own homes they keep the house on the market for an average of ten more days, and hold out for the best offer.
Members of the Ku Klux Klan similarly used information to their advantage. They created code words, secret passwords, nicknames for their leaders, and more. Members of the Klan were in the “in crowd” and so were privy to this information. To outsiders however, the lack of knowledge about Klan dealings was intimidating. Only when the information asymmetry was eliminated by making it public—thanks to the work of an undercover agent—did the fear slowly abate.
Real estate agents and the Ku Klux Klan are just two of the many interesting subjects tackled by the authors of Freakonomics. It’s a great book that is likely to expand your worldview; I highly recommend it.
Is it already on your TRL? If you’ve read it, what did you think? Let me know!