Freakonomics by Stephen Levitt and Stephen J. Dubner
Introduction: The Hidden Side of Everything
There are several things required to understand the world through economics: first, knowing the incentives of all parties; second, realizing that conventional wisdom is usually wrong; third, understanding that most effects have subtle and distant causes and the most obvious is often the wrong one; fourth, specialists like salesman and lawyers use obscure knowledge to achieve their own ends and the internet helps to erode this advantage by making knowledge more freely available to people; lastly, data is invaluable to understanding the world.
Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?
People all learn to respond to incentives, whether positive or negative from the outset of life. An incentive is simply a means of urging people to do more of a good thing and less of a bad thing. There are three basic flavors of incentive: economic, social and moral. Economic incentive is something material or tangible; moral is based of self-judgments; social is terribly powerful as it depicts what other people think of you resulting from your own actions or choices. Any incentive is inherently a trade-off; whatever the incentive, whatever the situation, dishonest people will try to gain an advantage by whatever means necessary.
Cheating is a natural act getting more for less. The government required the High-Stakes Testing as part of the No Child Left Behind policy. A teacher whose students test poorly can be censured or passed over for a raise or promotion. To catch a cheater it helps to think like one. The Chicago public school system fired dozens of teachers for cheating. It is true that sports and cheating go hand in hand. Sumo, the national sport of Japan, is said to be less about competition than about honor itself. Sumo wrestlers are ranked according to complex schemes. The eight victory is very critical, the line between promotion and demotion and is four times as valuable in the rankings as the typical victory. The wrestlers made a quid pro quo agreement: you let me win today, when I really need the victory, and I’ll let you win the next time. Two former sumo wrestlers went public to expose the match rigging within their sport, but they died hours apart. Meanwhile, Paul Feldman conducted a bagel study several years ago. He concluded that people cheated more often during bad weather and around stressful holidays.
Chapter 2: How is the Ku Klux Klan Like a Group of Real-Estate Agents?
Contrary to conventional wisdom, lynching of blacks decreased because they became more submissive over time. Ku Klux Klan steeped in all sorts of ridiculous and complicated traditions and secrets and the leadership generated revenues from initiation fees, annual dues, “protection money” etc. They were powerful because they horded information that others could not access, that is exactly the same principle employed by the lawyers and real estate agents. Since information is power, they use information asymmetry, accepting that someone usually an expert knows more than someone else usually a consumer, to try and get higher prices for their services.
Chapter 3: Why Do Drug Dealers Still Live with Their Moms?
Experts’ words are not always correct, but are hard to hard. For example, there is a saying that there were about 3 million homeless Americans, but that sure seemed high. In addition, women’s rights advocates claims that one in three American women will be a victim of rape or attempted rape, though the actual figure is one in eight. The image of a wealth, armed drug dealer is also a myth created by advocates. A scholar, Sudhir Venkatesh, lived among a branch of a gang the “Black Gangster Disciple Nation.” There he found out about the cultural and hierarchal relationship of the crack industry for six years. He got a compilation of documents and budget reports of the gang and this revealed that there was...
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