Levitt And Dubner's Freakonomics

Written by Steven D. Levitt and Stephen J. Dubner, Freakonomics is built upon three major philosophies: incentives are the fundamentals of life, experts on a subject use their knowledge as an advantage to serve their own wellbeing, and orthodox wisdom is wrong most of the time. This book goes into detail to explain the mindsets of humans, from school teachers to sumo wrestlers, through statistics. Levitt and Dubner claim that when the data is closely examined it can relate to more concepts than originally hypothesized. The style of this informative piece is very precise yet, at the same time, very concise and to the point. The tone carried throughout the book is informative and knowledgeable. The authors use distinct tactics to get points across

quickly, easily, and understandably. Freakonomics efficiently proposes new outlooks of economic and social issues and behaviors to better understand humanity.
The first concept in the book explains incentives and how people respond in different ways to them.

The exhortation of using incentives to receive and analyze responses reoccurs throughout the book periodically. Levitt and Dubner believe that incentives can be categorized into three different types: moral incentives, social incentives, and economic incentives. Moral incentives are defined as circumstances in which someone acts purely out of conscience or guilt. Social incentives are observed when a person’s actions are solely linked with shame or glory. Economic incentives are when people act with financial interests and benefits in mind. One example portrayed in the book is the day care center in Israel. When parents start getting charged a late fee for picking up their child at the daycare facility, more parents show up late. Before the fine was placed, parents would pick up their kids on time with a moral or social incentive. After the fine was placed parents acted with an economic incentive, which wasn’t as bad as a sense of guilt. Further data shows evidence of relations between incentives and cheating in the Chicago Public School System. In 1996, the school system started to give bonuses based on the standardized test scores of teachers’ students. If a teacher’s students showed improvements on their test scores, the teacher received a monetary bonus. Researchers found after studying score results from 1993–2000 that a spike in cheating occurred in 1996. A three-year study showed that on average cheating occurred in at least 200 Chicago classrooms per year. Therefore, Levitt and Dubner’s theory of incentives is

valid.
Another chapter mainly focuses on how conservative wisdom is typically wrong. Throughout this chapter, Levitt and Dubner cite many pieces of wisdom that are flawed. These errors occur with experts in a field. They make observations and conclusions without looking at the facts, these assumptions then get spread by the media and other people in that field and give credibility to the error. If repeated often, an error can be believed to be true and could be accepted by society. An example used for this assertion is that all drug dealers are rich. They refute this statement by showing how the drug business is actually a “winner take all” market, where not many people actually succeed but the few who do get paid large amounts of money.
Another frequently discussed idea is one on the economic value of information. This concept is that “experts” on a subject will always use their knowledge for economic gain- an economic incentive. Evidence for this assertion resides in the fact that real estate agents convince sellers that waiting for a better offer is not the best option and to just sell it at the lower price. However, agents can then tell the buyers that the houses can be at a lower price than what is stated, leading to an equilibrium in the housing market and creating an economic incentive.
Freakonomics takes the facts that people believed to be true and proves them to be incorrect by consistently supporting claims with examples and data. The three concepts that the book is focused on are then seen: incentives are the foundation of societal behavior, information comes at a price when dealing with experts, and conventional wisdom isn’t always true.