Freakonomics

December 27th, 2008

Steven Levitt, the economist, and Stephen J. Dubner, journalist, collaborate on this title that has become something of a household name. Freakonomics is the study of common phenomena through the lens of incentives and economic reality. Levitt takes on teachers inflating test scores when standardized tests are a determining factor in their careers. It's hardly surprising, but nevertheless few people seem to give it a second thought. Likewise, in every area of life there are interests and motives, and the powers that be wish to wield a certain amount of control over the situation. But the incentives they set are often not effective.

A compelling example is the study of crack dealers, based on field data supplied by Sudhir Venkatesh. There is a certain public perception that drug dealers wield a lot of power and consequently enjoy much wealth. In reality, it turns out, much like any corporation, the foot soldiers live on minimum wage level incomes, while only the fat cats cash in. But then why would people subject themselves to such high risk for little reward? The answer seems to be that this is the only career that seems plausible to their lives.

While Levitt's case studies are generally informative, Dubner's presentation is often dull and publication-like.

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1 Responses to "Freakonomics"

  1. BM says:

    Reading about inflating teachers, the very interesting question emerge for me: how many people are really honest in a typical every day situations, e.g. pay for goods even if nobody look at them. The experience with bagels, described in chapter 1, showed that only about 13% of people is not! Great, I always belived that most people are honest, bagels sale confirmed this to some degree.
    I believe also that most people have high moral standards, I mean: they are not only honest, but also friendly, helpsom...etc. Maybe I will find some statistical data about this in next chapters.

    Interesting book so long!