Freakonomics

Overview

The book is a collection of 'economic' articles written by Levitt, an expert who has already gained a reputation for applying economic theory to diverse subjects not usually covered by "traditional" economists; he does, however, accept the standard neoclassical microeconomic model of rational utility-maximization. In Freakonomics, Levitt and Dubner argue that economics is, at root, the study of incentives. The book's topics include:

  • Chapter 1: Discovering cheating as applied to teachers and sumo wrestlers, as well as a typical Washington DC area bagel business and its customers
  • Chapter 2: Information control as applied to the Ku Klux Klan and real-estate agents
  • Chapter 3: The economics of drug dealing, including the surprisingly low earnings and abject working conditions of crack cocaine dealers
  • Chapter 4: The role legalized abortion has played in reducing crime, contrasted with the policies and downfall of Romanian dictator Nicolae Ceauşescu (Levitt explored this topic in an earlier paper entitled "The Impact of Legalized Abortion on Crime.")
  • Chapter 5: The negligible effects of good parenting on education
  • Chapter 6: The socioeconomic patterns of naming children (nominative determinism)

One example of the authors' use of economic theory involves demonstrating the existence of cheating among sumo wrestlers. In a sumo tournament, all wrestlers in the top division compete in 15 matches and face demotion if they do not win at least eight of them. The sumo community is very close-knit, and the wrestlers at the top levels tend to know each other well. The authors looked at the final match, and considered the case of a wrestler with seven wins, seven losses, and one fight to go, fighting against an 8-6 wrestler. Statistically, the 7-7 wrestler should have a slightly below even chance, since the 8-6 wrestler is slightly better. However, the 7-7 wrestler actually wins around 80% of the time. Levitt uses this statistic and other data gleaned from sumo wrestling matches, along with the effect that allegations of corruption have on match results, to conclude that those who already have 8 wins collude with those who are 7-7 and let them win, since they have already secured their position for the following tournament. Despite condemnation of the claims by the Japan Sumo Association following the book's publication in 2005, the 2011 Grand Tournament in Tokyo was cancelled for the first time since 1946 because of allegations of match fixing.[3]

The authors attempt to demonstrate the power of data mining, as a number of their results emerge from Levitt's analysis of various databases. The authors posit that various incentives encourage teachers to cheat by assisting their students with multiple-choice high-stakes tests. Such cheating in the Chicago school system is inferred from detailed analysis of students' answers to multiple choice questions. But first Levitt asks, "What would the pattern of answers look like if the teacher cheated?" The simple answer: the more difficult questions found at the end of test sections will be answered correctly more frequently than the easy questions at the beginning of test sections.

Reappraisals

In Chapter 2 of Freakonomics, the authors wrote of their visit to folklorist Stetson Kennedy's Florida home where the topic of Kennedy's investigations of the Ku Klux Klan were discussed. However, in their January 8, 2006 column in the New York Times Magazine, Dubner and Levitt wrote of questions about Stetson Kennedy's research ("Hoodwinked", pp. 26–28) leading to the conclusion that Kennedy's research was at times embellished for effectiveness.

In the "Revised and Expanded Edition" this embellishment was noted and corrected: "Several months after Freakonomics was first published, it was brought to our attention that this man's portrayal of his crusade, and various other Klan matters, was considerably overstated....we felt it was important to set straight the historical record."[4]


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