Freakonomics—Steven Levitt and Stephen Dubner

September 25, 2005

Economics

            Economics is defined by the dictionary as; the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems. Steven Levitt—noted as being a “rogue economist”—ventures far from the politically correct study of economics. Levitt’s vantage point is that economics is the study of a much broader spectrum—it is, as he views it, the study of how people think, the behavior of individuals, their response to incentives, and the correlation between crime, corruption and cheating that is innate to most human beings. The explanatory notes introduces Levitt’s theory to the reader: “Levitt’s underlying belief was that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking” (xii). Original in thought and implementation, most of the facts, figures, and conclusions found in Freakonomics are “unlike [those] of most academics
[because] he is unafraid of anecdote and storytelling.” Levitt does not write to be accepted as an economist, scientist, philosopher, or theologian, nor does he fear rejection and unpopularity. In Freakonomics, Levitt demystifies some of the dogmatic notions that we humans have come to commonly accept. With his demystification comes the revelation and profession of the truth about inherent selfishness, corruption, crime, and cheating.

            What comprises economics? Albeit Levitt does not have a “unifying” theme for his work—as he made clear in his interview for Harvard’s Society of Fellows—he did find a common factor in every one of his studies. People respond to incentives. His thesis essentially stated that people will go to great lengths, often compromising their values for crime, corruption, and cheating; which in turn would benefit their short term and potentially long term, well being. People from every level of financial, professional, and social standing will naturally do what is in the best interest of themselves, thereby responding to incentives. The incentives, especially those addressed in this book, vary greatly. The relationship between schoolteachers and Sumo wrestlers is that they both need to cheat so that they can keep their jobs and be accredited with good work. The study conducted on school teachers concluded that many teachers cheat by manipulating the answers on their pupil’s standardized tests. The incentives to do this would be so that they retain their jobs, are credited with superior teaching, and in some cases receive cash and other financial bonuses. Levitt also studied the peculiar win/loss records of some sumo wrestlers in yearly tournaments. He insinuated that Japanese sumo wrestlers who were not “on the bubble” during one of the bi-monthly tournaments may have acted altruistically–in that they essentially gave the win to the opponent because it would be of no use to the wrester who had no chance of winning the tournament. The incentives to the sumo wrestler who cheated to win are quite alluring. “Each wrestler maintains a ranking that affects every slice of his life: how much money he makes, how large an entourage he caries, how much he gets to eat, sleep, and otherwise take advantage of his success…A wrestler near the top of this elite pyramid may earn millions and is treated like royalty” (40). Life outside the elite, however, is not as alluring. The salary is normally less than 1/10 of the salary of those who are in the elite. It can be deduced that “desperate times call for desperate measures,” even if the times aren’t so desperate. Levitt gave examples of professionals such as doctors and real estate agents that will confuse the client with “professional gibberish” so that they can walk away with the most benefits and the least costs (or inputs) possible.

            People are often flabbergasted by the “superiority” of professionals. Consumers and clients of professionals are often taken advantage because they just don’t feel as thought they can be as good or as qualified as someone who specializes in the trade. The real estate agent example posed an excellent, eye opening circumstance. Real estate agents will put in far less time selling your house then they would if they were selling their own house. This is because if spends more time selling your house, the marginal increase in profit for the agent would not be worth his or her time (which could be spent making ten times more money on a new sale).

            Incentives are not merely the benefit that one receives, but they also refer to the deterrent factors and consequences of peoples actions. Often times an economic incentive is substituted for a moral incentive. Other times, the social incentive is included.  Incentives are simply a means of promoting people to do more of a good thing and less of a bad thing. “Think about the anti-smoking campaign of recent years. The addition of $3-per-pack “sin tax” is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive” (21).

             I found Levitt’s study on abortion and its correlation with crime rate particularly interesting. I think that I speak for many people when I say that I never would have even considered abortion as being a positive influence in the decrease in crime rate (2 decades after Roe vs. Wade was decided). From around 1975 to about 1990, the crime rate in the United States had risen 80 percent. Contrary to what experts had anticipated, the crime rate suddenly began to fall at a quick rate. The criminologists, police officials, economists, politicians, and others who deal with crime matters had a tough time discovering the causes of the crime drop because they did not anticipate it happening. Many newspaper agencies reported the following explanation for the crime drop: innovative policing strategies, increase reliance on prisons, changes in crack and other drug markets, the aging of the population, tougher gun control laws, strong economy, and increased number of police, among other made up explanations. It would take a “rogue” economist to even imply that abortion was the primary reason for a decline in crime rates. Levitt argued that the typical woman who had an abortion was lower to middle class, of low income, limited education, limited resources, and resided in an environment that was not nurturing/safe/prosperous/or peaceful. His hypothesis is that there were less babies born into poor circumstance families then their would have been if abortion was illegal and lower class families were forced to birth an unwanted child. Levitt thinks that by the 1990s, the generation of potentially criminals were not alive and therefore had no contribution to crime. The crime rate, as result dropped dramatically for that missing generation of low income people. In 1973, legalized abortion was allowed for every state in the America with the U.S. Supreme Court ruling in Roe v. Wade. Justice Harry Blackmun had a statement to the ‘would-be mother predicament:’

“The detriment that the State would impose upon the pregnant woman by denying this choice altogether is apparent…Maternity, or additional offspring, may force upon the woman a distressful life and future. Psychological harm may be imminent. Mental and physical health may be taxed by child care. There is also the distress, for all concerned, associated with the unwanted child, and there is a problem of brining a child into a family already unable, psychologically and otherwise, to care for it.”

I think that Levitt’s assertion is quite intelligent. The subject of abortion, is now, and always will be a moral one. Levitt approached his theory with the scientific method. He made an observation, asked a question, collected data, proved or disproved his theory, and made a conclusion. By 1980, approximately 1.6 million abortions occurred. The women who took advantage of the cheap and legal abortion were often unmarried, in their teens, or poor, and sometimes all three. A scientific study showed that the children who were aborted would be 50 percent more likely to live in poverty; and 60 percent more likely to grow up with just one parent. These two factors are the single greatest predictors that a child will have a criminal future.

I think that the facts the Levitt obtained are quite accurate. He does not site his sources specifically, but he does mention the use of “a separate study.” It seemed as though he was able to manipulate the facts to promote his thesis slightly. I liked how he went through the top 8 crime drop explanations in great detail and falsified each one of them. He showed that those explanations were merely excuses on the part of “experts” who had failed to predict the crime rate accurately. I do agree with his thesis though. After reading his point, outlined in great detail, I can see why the multitude of abortions contributed so greatly to the decrease in crime rate. It is hard to tie incentives to abortion, but Levitt made that connection. An abortion is a incredibly tough, moral decision for most parents. Economically, an aborted child will result in the parent living a comparatively higher standard of living. Economically and socially, the child—who would have likely grown up in poor circumstances, is not filtered through society, making visits to jail along the way. The society of the early 1990s, fortunately or unfortunately, was better of from most economic standpoints as a result of abortion.

            In conclusion,Freakonomics was a fascinating book to read. Most people that I come in contact with believe what they hear, and don’t try too hard to uncover, or demystify our world as we know it. The social science of economics is taken to the next level by Levitt. He takes facts and figures, and applies them to unveil the hidden side of practical situations. In most of the examples Levitt offered, he referenced the constant factor in all of economics; incentives. His clear and referenced notions opened my eyes and offered me a fresh perspective on the “cluttered” world that we live in.

Freakonomics—Steven Levitt and Stephen Dubner

            Economics is defined by the dictionary as; the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems. Steven Levitt—noted as being a “rogue economist”—ventures far from the politically correct study of economics. Levitt’s vantage point is that economics is the study of a much broader spectrum—it is, as he views it, the study of how people think, the behavior of individuals, their response to incentives, and the correlation between crime, corruption and cheating that is innate to most human beings. The explanatory notes introduces Levitt’s theory to the reader: “Levitt’s underlying belief was that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking” (xii). Original in thought and implementation, most of the facts, figures, and conclusions found in Freakonomics are “unlike [those] of most academics
[because] he is unafraid of anecdote and storytelling.” Levitt does not write to be accepted as an economist, scientist, philosopher, or theologian, nor does he fear rejection and unpopularity. In Freakonomics, Levitt demystifies some of the dogmatic notions that we humans have come to commonly accept. With his demystification comes the revelation and profession of the truth about inherent selfishness, corruption, crime, and cheating.

            What comprises economics? Albeit Levitt does not have a “unifying” theme for his work—as he made clear in his interview for Harvard’s Society of Fellows—he did find a common factor in every one of his studies. People respond to incentives. His thesis essentially stated that people will go to great lengths, often compromising their values for crime, corruption, and cheating; which in turn would benefit their short term and potentially long term, well being. People from every level of financial, professional, and social standing will naturally do what is in the best interest of themselves, thereby responding to incentives. The incentives, especially those addressed in this book, vary greatly. The relationship between schoolteachers and Sumo wrestlers is that they both need to cheat so that they can keep their jobs and be accredited with good work. The study conducted on school teachers concluded that many teachers cheat by manipulating the answers on their pupil’s standardized tests. The incentives to do this would be so that they retain their jobs, are credited with superior teaching, and in some cases receive cash and other financial bonuses. Levitt also studied the peculiar win/loss records of some sumo wrestlers in yearly tournaments. He insinuated that Japanese sumo wrestlers who were not “on the bubble” during one of the bi-monthly tournaments may have acted altruistically–in that they essentially gave the win to the opponent because it would be of no use to the wrester who had no chance of winning the tournament. The incentives to the sumo wrestler who cheated to win are quite alluring. “Each wrestler maintains a ranking that affects every slice of his life: how much money he makes, how large an entourage he caries, how much he gets to eat, sleep, and otherwise take advantage of his success…A wrestler near the top of this elite pyramid may earn millions and is treated like royalty” (40). Life outside the elite, however, is not as alluring. The salary is normally less than 1/10 of the salary of those who are in the elite. It can be deduced that “desperate times call for desperate measures,” even if the times aren’t so desperate. Levitt gave examples of professionals such as doctors and real estate agents that will confuse the client with “professional gibberish” so that they can walk away with the most benefits and the least costs (or inputs) possible.

            People are often flabbergasted by the “superiority” of professionals. Consumers and clients of professionals are often taken advantage because they just don’t feel as thought they can be as good or as qualified as someone who specializes in the trade. The real estate agent example posed an excellent, eye opening circumstance. Real estate agents will put in far less time selling your house then they would if they were selling their own house. This is because if spends more time selling your house, the marginal increase in profit for the agent would not be worth his or her time (which could be spent making ten times more money on a new sale).

            Incentives are not merely the benefit that one receives, but they also refer to the deterrent factors and consequences of peoples actions. Often times an economic incentive is substituted for a moral incentive. Other times, the social incentive is included.  Incentives are simply a means of promoting people to do more of a good thing and less of a bad thing. “Think about the anti-smoking campaign of recent years. The addition of $3-per-pack “sin tax” is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive” (21).

             I found Levitt’s study on abortion and its correlation with crime rate particularly interesting. I think that I speak for many people when I say that I never would have even considered abortion as being a positive influence in the decrease in crime rate (2 decades after Roe vs. Wade was decided). From around 1975 to about 1990, the crime rate in the United States had risen 80 percent. Contrary to what experts had anticipated, the crime rate suddenly began to fall at a quick rate. The criminologists, police officials, economists, politicians, and others who deal with crime matters had a tough time discovering the causes of the crime drop because they did not anticipate it happening. Many newspaper agencies reported the following explanation for the crime drop: innovative policing strategies, increase reliance on prisons, changes in crack and other drug markets, the aging of the population, tougher gun control laws, strong economy, and increased number of police, among other made up explanations. It would take a “rogue” economist to even imply that abortion was the primary reason for a decline in crime rates. Levitt argued that the typical woman who had an abortion was lower to middle class, of low income, limited education, limited resources, and resided in an environment that was not nurturing/safe/prosperous/or peaceful. His hypothesis is that there were less babies born into poor circumstance families then their would have been if abortion was illegal and lower class families were forced to birth an unwanted child. Levitt thinks that by the 1990s, the generation of potentially criminals were not alive and therefore had no contribution to crime. The crime rate, as result dropped dramatically for that missing generation of low income people. In 1973, legalized abortion was allowed for every state in the America with the U.S. Supreme Court ruling in Roe v. Wade. Justice Harry Blackmun had a statement to the ‘would-be mother predicament:’

“The detriment that the State would impose upon the pregnant woman by denying this choice altogether is apparent…Maternity, or additional offspring, may force upon the woman a distressful life and future. Psychological harm may be imminent. Mental and physical health may be taxed by child care. There is also the distress, for all concerned, associated with the unwanted child, and there is a problem of brining a child into a family already unable, psychologically and otherwise, to care for it.”

I think that Levitt’s assertion is quite intelligent. The subject of abortion, is now, and always will be a moral one. Levitt approached his theory with the scientific method. He made an observation, asked a question, collected data, proved or disproved his theory, and made a conclusion. By 1980, approximately 1.6 million abortions occurred. The women who took advantage of the cheap and legal abortion were often unmarried, in their teens, or poor, and sometimes all three. A scientific study showed that the children who were aborted would be 50 percent more likely to live in poverty; and 60 percent more likely to grow up with just one parent. These two factors are the single greatest predictors that a child will have a criminal future.

I think that the facts the Levitt obtained are quite accurate. He does not site his sources specifically, but he does mention the use of “a separate study.” It seemed as though he was able to manipulate the facts to promote his thesis slightly. I liked how he went through the top 8 crime drop explanations in great detail and falsified each one of them. He showed that those explanations were merely excuses on the part of “experts” who had failed to predict the crime rate accurately. I do agree with his thesis though. After reading his point, outlined in great detail, I can see why the multitude of abortions contributed so greatly to the decrease in crime rate. It is hard to tie incentives to abortion, but Levitt made that connection. An abortion is a incredibly tough, moral decision for most parents. Economically, an aborted child will result in the parent living a comparatively higher standard of living. Economically and socially, the child—who would have likely grown up in poor circumstances, is not filtered through society, making visits to jail along the way. The society of the early 1990s, fortunately or unfortunately, was better of from most economic standpoints as a result of abortion.

            In conclusion,Freakonomics was a fascinating book to read. Most people that I come in contact with believe what they hear, and don’t try too hard to uncover, or demystify our world as we know it. The social science of economics is taken to the next level by Levitt. He takes facts and figures, and applies them to unveil the hidden side of practical situations. In most of the examples Levitt offered, he referenced the constant factor in all of economics; incentives. His clear and referenced notions opened my eyes and offered me a fresh perspective on the “cluttered” world that we live in.

Freakonomics—Steven Levitt and Stephen Dubner

            Economics is defined by the dictionary as; the social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems. Steven Levitt—noted as being a “rogue economist”—ventures far from the politically correct study of economics. Levitt’s vantage point is that economics is the study of a much broader spectrum—it is, as he views it, the study of how people think, the behavior of individuals, their response to incentives, and the correlation between crime, corruption and cheating that is innate to most human beings. The explanatory notes introduces Levitt’s theory to the reader: “Levitt’s underlying belief was that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking” (xii). Original in thought and implementation, most of the facts, figures, and conclusions found in Freakonomics are “unlike [those] of most academics
[because] he is unafraid of anecdote and storytelling.” Levitt does not write to be accepted as an economist, scientist, philosopher, or theologian, nor does he fear rejection and unpopularity. In Freakonomics, Levitt demystifies some of the dogmatic notions that we humans have come to commonly accept. With his demystification comes the revelation and profession of the truth about inherent selfishness, corruption, crime, and cheating.

            What comprises economics? Albeit Levitt does not have a “unifying” theme for his work—as he made clear in his interview for Harvard’s Society of Fellows—he did find a common factor in every one of his studies. People respond to incentives. His thesis essentially stated that people will go to great lengths, often compromising their values for crime, corruption, and cheating; which in turn would benefit their short term and potentially long term, well being. People from every level of financial, professional, and social standing will naturally do what is in the best interest of themselves, thereby responding to incentives. The incentives, especially those addressed in this book, vary greatly. The relationship between schoolteachers and Sumo wrestlers is that they both need to cheat so that they can keep their jobs and be accredited with good work. The study conducted on school teachers concluded that many teachers cheat by manipulating the answers on their pupil’s standardized tests. The incentives to do this would be so that they retain their jobs, are credited with superior teaching, and in some cases receive cash and other financial bonuses. Levitt also studied the peculiar win/loss records of some sumo wrestlers in yearly tournaments. He insinuated that Japanese sumo wrestlers who were not “on the bubble” during one of the bi-monthly tournaments may have acted altruistically–in that they essentially gave the win to the opponent because it would be of no use to the wrester who had no chance of winning the tournament. The incentives to the sumo wrestler who cheated to win are quite alluring. “Each wrestler maintains a ranking that affects every slice of his life: how much money he makes, how large an entourage he caries, how much he gets to eat, sleep, and otherwise take advantage of his success…A wrestler near the top of this elite pyramid may earn millions and is treated like royalty” (40). Life outside the elite, however, is not as alluring. The salary is normally less than 1/10 of the salary of those who are in the elite. It can be deduced that “desperate times call for desperate measures,” even if the times aren’t so desperate. Levitt gave examples of professionals such as doctors and real estate agents that will confuse the client with “professional gibberish” so that they can walk away with the most benefits and the least costs (or inputs) possible.

            People are often flabbergasted by the “superiority” of professionals. Consumers and clients of professionals are often taken advantage because they just don’t feel as thought they can be as good or as qualified as someone who specializes in the trade. The real estate agent example posed an excellent, eye opening circumstance. Real estate agents will put in far less time selling your house then they would if they were selling their own house. This is because if spends more time selling your house, the marginal increase in profit for the agent would not be worth his or her time (which could be spent making ten times more money on a new sale).

            Incentives are not merely the benefit that one receives, but they also refer to the deterrent factors and consequences of peoples actions. Often times an economic incentive is substituted for a moral incentive. Other times, the social incentive is included.  Incentives are simply a means of promoting people to do more of a good thing and less of a bad thing. “Think about the anti-smoking campaign of recent years. The addition of $3-per-pack “sin tax” is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive” (21).

             I found Levitt’s study on abortion and its correlation with crime rate particularly interesting. I think that I speak for many people when I say that I never would have even considered abortion as being a positive influence in the decrease in crime rate (2 decades after Roe vs. Wade was decided). From around 1975 to about 1990, the crime rate in the United States had risen 80 percent. Contrary to what experts had anticipated, the crime rate suddenly began to fall at a quick rate. The criminologists, police officials, economists, politicians, and others who deal with crime matters had a tough time discovering the causes of the crime drop because they did not anticipate it happening. Many newspaper agencies reported the following explanation for the crime drop: innovative policing strategies, increase reliance on prisons, changes in crack and other drug markets, the aging of the population, tougher gun control laws, strong economy, and increased number of police, among other made up explanations. It would take a “rogue” economist to even imply that abortion was the primary reason for a decline in crime rates. Levitt argued that the typical woman who had an abortion was lower to middle class, of low income, limited education, limited resources, and resided in an environment that was not nurturing/safe/prosperous/or peaceful. His hypothesis is that there were less babies born into poor circumstance families then their would have been if abortion was illegal and lower class families were forced to birth an unwanted child. Levitt thinks that by the 1990s, the generation of potentially criminals were not alive and therefore had no contribution to crime. The crime rate, as result dropped dramatically for that missing generation of low income people. In 1973, legalized abortion was allowed for every state in the America with the U.S. Supreme Court ruling in Roe v. Wade. Justice Harry Blackmun had a statement to the ‘would-be mother predicament:’

“The detriment that the State would impose upon the pregnant woman by denying this choice altogether is apparent…Maternity, or additional offspring, may force upon the woman a distressful life and future. Psychological harm may be imminent. Mental and physical health may be taxed by child care. There is also the distress, for all concerned, associated with the unwanted child, and there is a problem of brining a child into a family already unable, psychologically and otherwise, to care for it.”

I think that Levitt’s assertion is quite intelligent. The subject of abortion, is now, and always will be a moral one. Levitt approached his theory with the scientific method. He made an observation, asked a question, collected data, proved or disproved his theory, and made a conclusion. By 1980, approximately 1.6 million abortions occurred. The women who took advantage of the cheap and legal abortion were often unmarried, in their teens, or poor, and sometimes all three. A scientific study showed that the children who were aborted would be 50 percent more likely to live in poverty; and 60 percent more likely to grow up with just one parent. These two factors are the single greatest predictors that a child will have a criminal future.

I think that the facts the Levitt obtained are quite accurate. He does not site his sources specifically, but he does mention the use of “a separate study.” It seemed as though he was able to manipulate the facts to promote his thesis slightly. I liked how he went through the top 8 crime drop explanations in great detail and falsified each one of them. He showed that those explanations were merely excuses on the part of “experts” who had failed to predict the crime rate accurately. I do agree with his thesis though. After reading his point, outlined in great detail, I can see why the multitude of abortions contributed so greatly to the decrease in crime rate. It is hard to tie incentives to abortion, but Levitt made that connection. An abortion is a incredibly tough, moral decision for most parents. Economically, an aborted child will result in the parent living a comparatively higher standard of living. Economically and socially, the child—who would have likely grown up in poor circumstances, is not filtered through society, making visits to jail along the way. The society of the early 1990s, fortunately or unfortunately, was better of from most economic standpoints as a result of abortion.

            In conclusion,Freakonomics was a fascinating book to read. Most people that I come in contact with believe what they hear, and don’t try too hard to uncover, or demystify our world as we know it. The social science of economics is taken to the next level by Levitt. He takes facts and figures, and applies them to unveil the hidden side of practical situations. In most of the examples Levitt offered, he referenced the constant factor in all of economics; incentives. His clear and referenced notions opened my eyes and offered me a fresh perspective on the “cluttered” world that we live in.