Freakonomics by Steven D. Levitt and Stephen J. Dubner shows that in life, everything has a hidden side.
The book also discusses many topics, such as: incentives are the cornerstones of modern life, the conventional wisdom is frequently wrong, dramatic effects often have distant causes, “experts” often use their informational advantage to serve their own agenda, and knowing what to measure and how to measure it makes a complicated world much less so. (Levitt & Dubner 12).
In this essay, I will be focusing on how incentives are the cornerstones of modern life, conventional wisdom is often wrong, and how “experts” often use their informational advantage to serve their own agenda. “An incentive is always a tiny object with astonishing power to change a situation. ” (Levitt and Dubner 17) All incentives can be categorized by three types of incentives: moral, social, and economic. Some of which, may have adverse effects, such as with daycare in Israel decided to start charging people a $3 fine per child for anyone that was more than ten minutes late.
One would assume that in response to this, parents would be more likely to pick up their kids in a timely fashion, but instead, the opposite happens. The amount of late pick-ups increase dramatically. The logic behind this is parents were able to pay off their guilt for being late. In other words, they saw paying the extra $60 a month as a way to substitute a moral incentive. (Levitt & Dubner 19-20). These adversaries, nevertheless, can be predicted and used to the advantages of others.
In illegal drug-dealing countries, such as Brazil, the government is legalizing all drug use and treating it as an addiction problem, rather than a crime. Surprisingly, this has lowered the amount of drug-related matters. In the United States, we try to crack down on drug use with strict laws and police enforcement. Consequently, this has caused the amount of drug-related delinquencies to sky-rocket in the past decade. It is like a teenage kid. If you tell them not to do something, they are most likely going to do it anyways just to spite you and rebel; opposed to allowing them to do it and them just not doing it.
Most incentives though, can be predicted and used to stimulate or punish people, but like in the “Daycare Dilemma,” are stronger and more enhanced for some circumstances than others. For example, police departments started posting pictures of johns and prostitutes in local papers and news stations to shame the guilty party. As Levitt & Dubner put it, “Which is a more horrifying deterrent: a $500 fine for soliciting a prostitute or the thought of your friends and family ogling you on www. HookersAndJohns. com? ” (Levitt & Dubner 18).
In this case, a social incentive was more humiliating and punishing to them than an economical one. Another key value in Freakonomics, is that “conventional wisdom” is often wrong. We form certain “notions” about how things and people should be. Such as a women’s rights activist. Studies have shown that they actually dramatize the statistics they give to guilt more people into standing behind their foundation. Most people would think that if anyone wanted to the right thing it would be activists, but that’s not always the case. In chapter 6, we learn about two boys named Winner and Loser.
Some might think “Well, with a name like Winner, he is better off to succeed. Unlike his brother, Loser, who is set up to fail. ” Conversely, Loser went on to thrive. “He went to prep school on a scholarship, graduated from Lafayette College in Pennsylvania, and joined the New York Police Department, where he made detective and, eventually, sergeant. ” (Levitt & Dubner 182) Winner however, was not so “inspired” by his name. He grew up to be a criminal with more than thirty arrests. Most people would think that with a sure-fire name like “Winner” he was bound to succeed, so how did he end up in jail?
Well, another example of someone not quite living up to their “destiny” is Ted Kazinsky, also known as the Unabomber. Kazinsky grew up in a white-suburban neighborhood with two parents. As a child he was known to be incredibly bright, like his parents. He later went on to attend and graduate from Harvard. In this case, he had everything going for him, yet, he became an infamous terrorist. These are just a few instances of orthodox thinking and knowledge being proven to be mistaken. W. C. Fields once said, “A thing worth having, is a thing worth stealing.” (Levitt & Dubner 21)
In this case, knowledge is used to exploit consumers. It happens every day, to almost everyone; professionals use their information to their benefit. A common example is in autorepair shops. Most people have gone in to get an inspection or to have a small problem fixed, and gotten a bill for WAY more than expected. Even after the mechanic has assured you that it won’t be costly. Furthermore, another example of it is in real estate. One would think that since real estate agents work off commission that they would want to get you the maximum profit possible; which they do, but they don’t at the same time.
Studies have shown that real estate agents will hold out for the best deal possible when selling their own home, but encourage you to take the first decent deal to come along. (Levitt & Dubner 8). The best way to stop this, is to do a little research on your before consulting an “expert. ” In conclusion, economics is the study of incentives and how people react to them. Freakonomics, however, studied the hidden meanings beyond that and the cases where incentives not only reacted as expected, but where they were reacting differently as well Levitt and Dubner did that by sticking to five main philosophies in their book, knowing what to measure and how to measure it makes a complicated world much less so, “experts” often use their information to their advantage, dramatic effects often have more subtle causes, “conventional wisdom” is often wrong, and incentives are the cornerstones of modern life. (Levitt & Dubner 12).
Three of which, I believed to be the most important: “specialists” often use their information to their advantage, “conventional astuteness” is recurrently false, and incentives are the keystones of contemporary life.