Literature Review: Summary and Reflection on the Book Freakonomics
In the book Freakonomics, there are many ideas and themes within the book that the authors, Steven D. Levitt and Stephen J. Dubner, use to take on real world situational problems (not necessarily associated with economics) and compare them using statistics and data collected in economies. Steven D. Levitt is an economist who has graduated from Harvard University as well as a few other institutes. Stephen J. Dubner is an award winning author who has graduated from Columbia University as well as a few other Universities. They both work together on gathering information and data on situational problems within society as well as our lives and come up with how many of the tactics people use to exploit a certain people or to gain personal wealth play roles in economics.
One of the five main fundamental ideas are incentives (which the book gives three different kinds) - the issue of how we react to rewards and punishments. The second is conventional wisdom where we take in something everyone believes is true and go with it. The other is the remote causes for effects; how our actions or others actions give out visible consequences. Including the advantage experts take of people with information and how they easily con people with it. The last is economic tools of measurement, showing the economy and how the people will get what they want, or demand, especially when others want the same thing. Many of these real world problems associated with each of our lives can relate to economics. Levitt shows how many topics relate to each other if you compare them all to an economic point of view. He takes two very different topics and goes in depth about what the problem is within each category - exposing industries as well as corporations and organizations including the unfairness in all other things. It goes from school teachers to sumo wrestlers all the way to racist groups and parenthood. Freakonomics shows the downside of most things but also shows how many of the people involved are actually either aware of the unfairness or they just simply are more susceptible to getting tied up in the false hopes that the people in charge give.
The problems that the authors analyze are how normal people in society are being manipulated by the “big boys” and how many organizations are corrupt. The chapters compare two topics and then show the point of view from an economic standpoint. The first chapter is about what school teachers have in common with sumo wrestlers; Levitt shows the corruption that link both together. It begins with a story about a pair of economists who tried to find a solution for parents who constantly came late to pick up their children from daycare. They found out that the punishment that they gave- a $3 fine after being late for 10 minutes- was ineffective because it was too little to get the parents to come and pick up their kids on time. In a way it paid off their guilt for coming late in the first place. The author Steven Levitt, also took crime as an example to show the different kinds of incentives. He then continues to talk about Sumo Wrestlers and how they also would have incentives and what that viewpoint may look like. He later talks about how cheating plays in as well and how school teachers could be cheating in the same way as Sumo Wrestlers are. He last talks about an experiment with bales at various offices conducted by Paul Feldman. In that experiment Feldman saw how many people would be honest or dishonest when it came to buying the balges. He found that most people were but there was a variation in when people were being dishonest.
The second chapter is about how the Klu Klux Klan is like a group of real estate agents. Levitt starts it off with writing about the history of the KKK and the aftermath of the war that started because of it. He writes about their secrets and how Stetson Kennedy, a writer dedicated to end bigotry, was invited to be a part of the KKK’s secret police. Kennedy moved into their ranks and later began to expose their secrets. The hate groups main act of terrorism was ynching, which decressed in the 1960s, which only had 3, meanwhile in the 1890s there were 1,100 diffferent occsions of lynching. The information was leaked thus causing the Klan to fall apart. Levitt later talks about how the use of information imbalance can make something vulnerable to fall apart , he adds in the internet and how it plays a role in economics with its customers and sellers. Levitt also talks about real estate agents and how they use information to influence their clients decisions. The whole point of the chapter was to say that people should be careful with the information that we and others put out today. All information isn't always true as well as the information we are surrounded with everyday contributes as an influence with our daily choices. This relates to what we learn in class by saying how the information we get is also something that influences us. Not only in the classroom but outside of it as well. Also the AP class talks about economics which also deals with a lot of information, there are at times imbalances in information between the produces and the buyers, which would also change the demand and supply cure. If the information is balanced then the curves would also change.
The third chapter goes with talking about why drug dealers usually still live with their mommas. In this chapter the author writes about “conventional wisdom” and explains what it is. Levitt talks about how it shouldn't always be trusted even though most people do. He focuses more on the drug dealing part of truths, that drug dealing is one of the most profitable businesses in America, particularly crack dealing. He writes about an individual who was a PhD student at the time, Sudhir Venkatesh, who came to know some gang members of the Black Gangster Disciple Nation. He became interested in their operation and what they did. Venkatesh lived with them in the projects. The boss of the gang was a man named J.T, who was also a college graduate in business and that made him sort of qualify to be boss. After living among them for a while he was given a three year-stay at Harvard’s Society of Fellows where he met the author Steven Levitt. Both men decided to collaborate together and wrote about the gang. They talked about how the gang world and the way it does is simple; the top bosses get the bigger share of the money while every level lower than them gets an even less share until you get to the very bottom where people are paying them to get in. It talks about how in other corporations you must be at the top of chain in order to have it good while the rest are doing the job in hopes of getting to the top. This chapter relates to the economics class because it's talking about business and economics is all about businesses and the trend lines that every industry has. It also relates to the real world because many people are in a sort of business, in this case, there are many people who are drug dealers.
The fourth chapter talks about how crime and abortion correlate as it has been previously discussed in the introdution of the book. Levitt starts with talking about how many large effects sometimes have distant, unexpected causes. He talks about abortion and how in Roamina, the ocmmunist dictator Nicolae Ceausescu, made abortion illegal. The dictator was later captured and killed by protestors of the ban, of what mostly consisted of the new generation after the ban was made. Those people who would not have been born if it was not for the ban. This generation was living a life less successful from the one before them. Levitt also goes on to talk about how the United States had the opposite effect happen to it. He goes into how there may be things that are showing some relation to each other but because of that relationship one thing does not have to be causing the other. Levitt also brings up the underground market or better known as the balck market where people sell illegal goods or legal good in an illegal way. He talks about how solutions to crimes and the punishments are wrong because the crime is dropping when in reality it is actually what is going on within the system and what changes occur that help put crime on the low. This chapter goes in with what the class is talking about because it talk s about regulations and in the economy there is always some sort of regulation that businesses and corporations have to follow which causes them personal problems as well as other kinds of problems.
The fifth chapter introduces the misguidance that parents experience because they feel that they need the help in knowing what is best for their child. In which the chapter shows why parents who worry about the success of their children fall into deception. many parents are misguided when it comes to parenting. He states that they fear the wrong things and that they are often blinded by fear when it comes to logical reasoning. He writes about incentives and how experts show themselves in a certain way to get fame or to get clients. Levitt shows how these experts will use tactics to entice their clients so that they take their advice or approach to the situation by using fear and immediate risk factors. The parenting experts in this case have incentive to focus on the specific risks that are more in the outrage factor in which it prompts frightened parents to fall for buying a certain product or plan causing the expert to gain more than the client. The physiological factors of fear and risk show some of the many ways of how psychology plays a role in economics. Talking about parenting, which any parent can say is a particularly difficult job. Just like consumers, as Levitt says, parents relying on the same kind of imperfect information that creates the kind of information asymmetry as discussed in Chapter 2. The uncertainty in what tactics produce healthy, successful children, parents rely on advice from others who they claim to know more than them on that topic. Because of this parents are more susceptible to being misled by these experts, Levitt conveys the idea that whatever parents do doesn't matter as much as people believe it does, he uses data to show that the parents actions don't matter but summarizes that it matters who the parents themselves are; determining how the child might turn out because of his or her surroundings even before birth.
The arguments that Levitt and Dubner make in their book Freakonomics are pretty rational. In the themes of morality and prescriptive vs. descriptive thinking, and irrational behavior, experts, and “conventional wisdom”, including incentives, they all have that same result. Each showing how people in certain industries such as service, manufacturing, entertainment, etc. take advantage of those who earn a lesser salary or the ones who are at the bottom of the hierarchy. Many of these arguments are backed with data that Dubner and Levitt took from real situations and instead of just stating the facts in their findings they took the economic point of view and delivered a more transparent look in those cases. In addition to providing evidence to their claims, the authors also explained and went into deeper depth in some cases showing the reader why it is the way it is - also concluding that the results are more simpler than they appear than in a regular view if you just scan the problems instead of really analyzing them.
Freakonomics helps society and with personal lives because the entire book is based on real life situations; regular people who don't get it easy in life connect more with what Levitt and Dubner are revealing in their book. Any person who is interested in how the economy works in everyday life can easily figure out what the book is trying to portray about the economic standpoint in certain circumstances. Depending on what you are looking at the results vary from each other but they resemble more than they contrast from each other. Another thing is that if a society is trying to cut off inequality and try to alleviate the hierarchy to make it more fitting and equal, Freakonomics provides the exact necessary evidence to prove that certain parts of society benefit more than others and can use the points made in this book to counter those industries.
Many people who are in a business or are in a corporation will most likely find this book more of something that exposes them. Freakonomics helps more those who are just regular people - not doing much to be dominant on the business side or anywhere else in the economy. Freakonomics isn't a book that necessarily helps people in certain areas, especially if those people work within the business side. Many of the cases shown in this book actually would hurt a company or industry because if more people knew about what was going on in the real world instead of thinking and believing that it's not as bad as people say it is, this world would be much different than what it is today. Many businessmen would lose a lot of credit as well as a lot of respect and dignity because of the tactics they use on people would be exposed and their business would drop because smart people don't go to con artists they stay away from them. But this isn't a utopia so we don't always have the brightest people in society who notice all the inequality and unfairness in all the cracks and crannies.
If I were to continue where Levitt left off I would prove is how the subjects Levitt and Dubner covered really do correspond with the economy and show its relationship with data as well as compare it to the data shown in Freakonomics. I would research in more depth about other areas that fit in with economics or some that don't and would shine a light on how the rich stay rich and the poor stay poor. But the main point is that I wouldn't just talk about the unfairness, I would actually show it in my writing so that the information I give out makes sense and you wouldn't have to decrypt the message as if it were a secret. Also there isn't much that Levitt and Dubner didn't come across, yes they could’ve covered more areas but all of those areas go into the same category and it would take a lot more to show an average Joe the real problems within industries with information going into depth about it. The problem isn't the book, it's the reader who is trying to figure it out; the evidence should be easy and transparent to for someone to see.
