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10 April 2009
Analysis and Critique of Freakonomics by Steven Levitts
Steven Levitts takes an interesting spin on economics in his book, Freakonomics. He uses the tools that are unique to the field of economics to answer several bizarre questions that he has formulated, and despite their bizarre nature, Levitts manages to use ordinary information to substantiate the equally bizarre answers to those questions. He begins the introduction with a shocking theory on the cause of the decline in crime in the 1990’s: Roe vs. Wade. The children, who were most likely to be the cause of a rise in crime, were instead aborted (Levitts 4). Without fear, Levitts flows directly into the theory that real estate agents are out for their own incentives, even at the detriment of their clients. Levitts uses evidence from data collected in regards to real estate agents selling their own homes versus data in regards to real estate agents selling their clients homes to back this theory, and makes a very good argument. This is an avenue to bring to the forefront his point of the advantage of expert information, or information asymmetry. His next introduction example is money in politics. Levitts uses this example to explain how conventional wisdom is often wrong, and the evidence is present in his example of how money really has no bearing on the outcome of a political election. Levitts also stresses that while he does mention many different concepts do not look for a unifying theme as there is not one.
The first chapter of Freakonomics addresses what school teachers and sumo wrestles could possibly have in common, which turns out to be cheating. Using data from standardized tests and from data collected regarding sumo wrestlers, Levitts confirms that both school teachers and sumo wrestlers have their reasons for cheating. He also discusses the different avenues that can be taken to accomplish this cheating. Levitts prime examples are evidence of teachers changing students’ test answers, and sumo wrestlers throwing a match in turn for a win later. He notes in his Bonus Materials section that the mention of cheating teachers caused more of flood of angry emails than did his abortion lowering crime theory, but his evidence is sound. (Levitts 252)
Chapter 2 deals with information asymmetry using examples of the Ku Klux Klan and the aforementioned real estate agents. The information asymmetry regarding the Ku Klux Klan was in its secrecy of a secret society, while real estate agents have trade secrets. The Ku Klux Klan was ruined by their secrets being aired on the radio, while market information on the internet has lessened real estate agents’ advantages. He also touches on how the internet has affected information asymmetry in other industries as well.
Shedding light on why drug dealers still live with their mothers is the basis of Chapter 3. Using data collected by Sudhir Venkatesh, Levitts makes clear how the hierarchy of drug dealing works, and how the dealers themselves really do not benefit greatly. This chapter is really geared toward the concept of taking conventional wisdom with a grain of salt.
Chapter 4 is where Levitts gets his chance to give some evidence to his theory on where all the criminals have gone. This chapter discusses what the popular excuses are for the drop in crime, such as the age of population and the change in the drug markets, and uses evidence to show these ideas’ flaws. Levitts then uses statistical data and correlation to give basis to his theory that abortion’s legalization and availability has caused the drop in crime.
Two chapters are devoted to parenting in essence. Chapter 5 deals with the question of how parents affect their children, and Chapter 6 has to do with what a child’s name reflects upon his or her parents. Many examples are given that explain that children are more affected by factors which include their parents prior to their...