Stephen Levitt, Stephen Dubner
Summary, chapter 1
The authors of Freakonomics discusses in chapter one about how incentives can do the opposite of what the incentives are created for. Incentives are the basis of all human action and interaction [i.e. - people do not act randomly, they are always following some set of self-imposed rules and/or are trying to gain something for themselves]. As an example, the authors speak about a study of daycare centers in Haifa, Israel, in which parents who pick their children up late from the centers are fined with 3$ fine. After the fine is introduced, the number of late pick-ups immediately goes up. The researchers find that the $3 fine turns out to be a poor incentive for parents to pick their children up on time because the fine is too low. Furthermore, the fine takes away the parents moral liability and they do not feel guilty for late pick-up as they will pay for it. Further authors compare teachers and sumo wrestlers to explain what they mean and why. Teachers in USA, especially public school teachers, are being tempted to cheat to receive bonuses for their children to do better on standartized testing. If their students do not do well, they do not get the extra money plus they can even lose their job. This is where the incentive that was created is doing what is not intended to do and that was for teachers to cheat for their students. Also, The authors do not suggest a way that it truly can be prevented besides having a state representative to administer the test, but schools can help curb the thought of cheating by not allowing the teacher to administer the test to their own students. Now Sumo wrestlers are doing the same thing but instead of cheating on tests they are rigging matches. Instead of just getting in there and playing the sport they are helping the wrestlers that are in their group. Like teaching, the better you do in Sumo wrestling the better pay you get. And when one player in the...
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