Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (Revised and Expanded)

by Steven D. Levitt, Stephen J Dubner

Overview

Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? How did the legalization of abortion affect the rate of violent crime?

These may not sound like typical questions for an econo-mist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded scholar who studies the riddles of everyday life—from cheating and crime to sports and child-rearing—and whose conclusions turn conventional wisdom on its head.

Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They usually begin with a mountain of data and a simple question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: freakonomics.

Through forceful storytelling and wry insight, Levitt and Dubner show that economics is, at root, the study of incentives—how people get what they want, or need, especially when other people want or need the same thing. In Freakonomics, they explore the hidden side of . . . well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Klu Klux Klan.

What unites all these stories is a belief that the modern world, despite a great deal of complexity and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking.

Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.

Bonus material added to the revised and expanded 2006 edition

• The original New York Times Magazine article about Steven D. Levitt by Stephen J. Dubner, which led to the creation of this book.
• Seven “Freakonomics” columns written for the New York Times Magazine, published between August 2005 and April 2006.
• Selected entries from the Freakonomics blog, posted between April 2005 and May 2006 at http://www.freakonomics.com/blog/.

Product Details

ISBN-13:	9780061792809
Publisher:	HarperCollins Publishers
Publication date:	02/17/2010
Sold by:	HARPERCOLLINS
Format:	eBook
Pages:	336
Sales rank:	34,862
File size:	1 MB

About the Author

Steven D. Levitt, a professor of economics at the University of Chicago, was awarded the John Bates Clark medal, given to the most influential American economist under the age of forty. He is also a founder of The Greatest Good, which applies Freakonomics-style thinking to business and philanthropy.

Stephen J. Dubner is an award-winning author, journalist, and radio and TV personality. He quit his first career—as an almost-rock-star—to become a writer. He has worked for The New York Times and published three non-Freakonomics books. He lives with his family in New York City.

Read an Excerpt

Chapter One

What Do Schoolteachers
and Sumo Wrestlers
Have in Common?

Imagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 p.m. But very often parents are late. The result: at day's end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?

A pair of economists who heard of this dilemma -- it turned out to be a rather common one -- offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free?

The economists decided to test their solution by conducting a study of ten day-care centers in Haifa, Israel. The study lasted twenty weeks, but the fine was not introduced immediately. For the first four weeks, the economists simply kept track of the number of parents who came late; there were, on average, eight late pickups per week per day-care center. In the fifth week, the fine was enacted. It was announced that any parent arriving more than ten minutes late would pay $3 per child for each incident. The fee would be added to the parents' monthly bill, which was roughly $380.

After the fine was enacted, the number of late pickups promptly went ... up. Before long there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.

Economics is, at root, the study of incentives: how people get what they want, or need, especially when other people want or need the same thing. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty -- it may involve coercion or exorbitant penalties or the violation of civil liberties -- but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.

We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight A's from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your father's insurance company. But if you perform so well that a rival company comes calling, you become a vice president and no longer have to work for your father. If you become so excited about your new vice president job that you drive home at eighty mph, you get pulled over by the police and fined $100. But if you hit your sales projections and collect a year-end bonus, you not only aren't worried about the $100 ticket but can also afford to buy that Viking range you've always wanted -- and on which your toddler can now burn her own finger.

An incentive is simply a means of urging people to do more of a good thing and less of a bad thing. But most incentives don't come about organically. Someone -- an economist or a politician or a parent -- has to invent them. Your three-year-old eats all her vegetables for a week? She wins a trip to the toy store. A big steelmaker belches too much smoke into the air? The company is fined for each cubic foot of pollutants over the legal limit. Too many Americans aren't paying their share of income tax? It was the economist Milton Friedman who helped come up with a solution to this one: automatic tax withholding from employees' paychecks.

There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack "sin tax" is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive.

Some of the most compelling incentives yet invented have been put in place to deter crime. Considering this fact, it might be worthwhile to take a familiar question -- why is there so much crime in modern society? -- and stand it on its head: why isn't there a lot more crime?

After all, every one of us regularly passes up opportunities to maim, steal, and defraud. The chance of going to jail—thereby losing your job, your house, and your freedom, all of which are essentially economic penalties -- is certainly a strong incentive. But when it comes to crime, people also respond to moral incentives (they don't want to do something they consider wrong) and social incentives (they don't want to be seen by others as doing something wrong). For certain types of misbehavior, social incentives are terribly powerful. In an echo of Hester Prynne's scarlet letter, many American cities now fight prostitution with a "shaming" offensive, posting pictures of convicted johns (and prostitutes) on websites or on local-access television. 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 ...

The foregoing is excerpted from Freakonomics by Steven D. Levitt and Stephen J Dubner. All rights reserved. No part of this book may be used or reproduced without written permission from HarperCollins Publishers, 10 East 53rd Street, New York, NY 10022

Table of Contents

	Introduction : the hidden side of everything	3
1	What do schoolteachers and sumo wrestlers have in common?	19
2	How is the Ku Klux Klan like a group of real-estate agents?	55
3	Why do drug dealers still live with their moms?	89
4	Where have all the criminals gone?	117
5	What makes a perfect parent?	147
6	Perfect parenting, Part II; or : would a Roshanda by any other name smell as sweet?	179
	Epilogue : two paths to Harvard	205

What People are Saying About This

Kurt Andersen

“Freakonomics is politically incorrect in the best, most essential way.... This is bracing fun of the highest order.”

Malcolm Gladwell

“Steven Levitt has the most interesting mind in America... Prepare to be dazzled.”

Reading Group Guide

About the Book

Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? What kind of impact did Roe v. Wade have on violent crime?

These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded young scholar who studies the riddles of everyday life -- from cheating and crime to sports and child-rearing -- and whose conclusions regularly turn the conventional wisdom on its head. He usually begins with a mountain of data and a simple, unasked question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: Freakonomics.

Through forceful storytelling and wry insight, Levitt and co-author Stephen J. Dubner show that economics is, at root, the study of incentives -- how people get what they want, or need, especially when other people want or need the same thing. In Freakonomics, they set out to explore the hidden side of ... well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan.

What unites all these stories is a belief that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and - if the right questions are asked -- is even more intriguing than we think. All it takes is a new way of looking. Steven Levitt, through devilishly clever and clear-eyed thinking, shows how to see through all the clutter.

Freakonomics establishes this unconventional premise: if morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.

Discussion Questions:

1. Most people think of economics as a dry subject matter concerning monetary and fiscal matters. How does Freakonomics change this definition?


2. Freakonomics argues that morality represent the way we'd like the world to work, whereas economics can show how the world really does work. Do you agree?


3. Freakonomics lists three varieties of incentives: social, moral, and financial. Can you think of others?


4. Freakonomics shows how the conventional wisdom is often shoddily formed. What are some instances of conventional wisdom that you've always doubted?


5. Does it seem as though "experts" truly hold too much power in the modern world, or are we lucky to have them?


6. What are some issues in your daily life toward which you can apply some Freakonomics-style thinking?


7. What were some of the most convincing arguments put forth in Freakonomics? What were some of the least convincing?


8. How does the argument linking Roe v. Wade to a drop in crime change your thinking about abortion?


9. How does the view of parenting in Freakonomics jibe with your own view?


10. After reading Freakonomics, do you think that cheating is more prevalent or less prevalent than you thought it was before you read the book?

About the authors

Steven Levitt is a Professor of Economics at the University of Chicago and an editor of The Journal of Political Economy. In January 2004 he was awarded the John Bates Clark medal -- for the economist under 40 who has made the greatest contribution to the discipline -- by the American Economic Association.

Stephen J. Dubner is the author of Confessions of a Hero Worshiper and Turbulent Souls and is a former writer and editor at the New York Times Magazine. He lives in New York City with his family.

Interviews

A Message from the Coauthor

Steven Levitt doesn't think like you and me. (Well, I can't vouch for you, but I can vouch for me.) He has a brain that seems to hum along on its very own frequency. He can look at some scenario -- the rise and fall of crime, the real-estate market, the modern obsession with competitive parenting -- and instantly begin to ask questions, and come up with answers, that are simply astounding. In retrospect, you may scratch your head and say, "Why didn't I think of that?" This is what makes his work so intoxicating: He answers the questions we haven't yet figured out how to ask.

Yes, it's true that Levitt is an economist. But never before has the so-called dismal science been given a less dismal presentation. As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients' best interests at heart? Why do black parents give their children names that may hurt their career prospects? Do schoolteachers cheat to meet high-stakes testing standards? Is sumo wrestling corrupt?

Levitt works with data, mountains of it, and from his data he teases out stories that are often surprising and may even make us uncomfortable, but which are most likely true. Several years ago, for instance, he wrote a paper linking Roe v. Wade with a drop in crime. His thinking went like this: the women most likely to seek an abortion in the wake of Roe v. Wade -- poor, single, or teenage mothers -- were the very women whose children, if born, have been shown most likely to become criminals. But since those children weren't born, crime began to decrease during the years they would have entered their criminal prime.

Unlike a politician or a theologian or a paid pundit, Levitt is free to come up with answers based on nothing more complicated than the truth. Morality, it could be argued, represents the way that people would like the world to work -- whereas economics represents how it actually does work. The modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and -- if the right questions are asked -- is even more intriguing than one might think. All it takes is a new way of looking. Stephen J. Dubner

Editorial Reviews

Is this book's appeal due to its wacky revisionist title, its unsettling take on Roe v. Wade, or just its compulsively readable argument that economics does nothing more than study the incentives that drive us? Probably all of the above. What we do know is that it's the only economics book we've ever labeled a page-turner. An extraordinary work of social science explanation without oversimplification.

bn.com

Economists can seem a little arrogant at times. They have a set of techniques and habits of thought that they regard as more ''rigorous'' than those of other social scientists. When they are successful -- one thinks of Amartya Sen's important work on the causes of famines, or Gary Becker's theory of marriage and rational behavior -- the result gets called economics. It might appear presumptuous of Steven Levitt to see himself as an all-purpose intellectual detective, fit to take on whatever puzzle of human behavior grabs his fancy. But on the evidence of Freakonomics, the presumption is earned.
— The New York York Times

Jim Holt

Though the idea of listening to an economics text may bring to mind nightmarish visions of incomprehensible facts, figures and graphs, this audiobook is refreshingly accessible and engrossing. Journalist Dubner reads with just the right mix of enthusiasm and awe, revealing juicy morsels of wisdom on everything from what sumo wrestlers and teachers have in common (a propensity to cheat) to whether parents can really push their kids to greatness by buying them Baby Einstein toys and enlisting them in numerous before- and after-school activities (not really). The only section that doesn't translate well to the format is the final one on naming conventions. The lists of "White Girl Names" and "Black Girl Names," and "Low-End" names and "High-End" names can be mind-numbing, though the text that breaks up these lists will intrigue. Overall, however, these unusual investigations by Levitt, the "rogue" of the subtitle, make for meaty-and entertaining-listening. Simultaneous release with the Morrow hardcover (Reviews, Mar. 14). (May) Copyright 2005 Reed Business Information.

Publishers Weekly

Economist Levitt and Dubner (Turbulent Souls) team up in this intriguing, quirky look at life and how to understand better the world in a new way. In 2003, the New York Times Magazine sent Dubner to do a profile of Levitt, and the idea for this book was born. Levitt looks at a variety of data, including KKK membership rolls, online dating services, and names for children, and finds in the math underlying answers to difficult questions that have a freakish quality. The quirky chapters include the commonality between schoolteachers and sumo wrestlers, why drug dealers still live with their mothers, and what makes a perfect parent. The crisp, bright narration by Dubner enlivens this title, which will appeal to fans of Malcolm Gladwell's The Tipping Point as well as to economists. Recommended for university libraries supporting a business and economics curriculum and larger public libraries.-Dale Farris, Groves, TX Copyright 2005 Reed Business Information.

Library Journal

Why do drug dealers live at home? Levitt (Economics/Univ. of Chicago) and Dubner (Confessions of a Hero Worshiper, 2003, etc.), who profiled Levitt for the New York Times, team up to demolish conventional wisdom. To call Levitt a "rogue economist" may be a tad hyperbolic. Certainly this epitome of antistyle ("his appearance is High Nerd: a plaid button-down shirt, nondescript khakis and a braided belt, brown sensible shoes") views the workaday world with different eyes; the young economist teases out meaning from juxtapositions that simply would not occur to other researchers. Consider this, for instance: in the mid-1990s, just when the Clinton administration projected it was about to skyrocket, crime in the U.S. fell markedly. And why? Because, Levitt hazarded a few years ago, of the emergent effects of the Roe v. Wade decision: legalized abortion prevented the births of millions of poor people who, beset by social adversity, were "much more likely than average to become criminals." The suggestion, Dubner writes, "managed to offend just about everyone," conservative and liberal alike, but it had high explanatory value. Levitt hasn't shied away from controversy in other realms, either, preferring to let the numbers speak for themselves: a young man named Jake will earn more job interviews than one with the same credentials named DeShawn; the TV game show The Weakest Link, like society as a whole, discriminates against the elderly and Hispanics; it is human nature to cheat, and the higher up in the organization a person rises, the more likely it is that he or she will cheat. Oh, yes, and street-level drug dealers live at home with their moms because they have to; most earn well belowminimum wage but accept the bad pay and dangerous conditions to get a shot at the big time, playing in what in effect is a tournament. "A crack gang works pretty much like the standard capitalist enterprise," Levitt and Dubner write, "you have to be near the top of the pyramid to make a big wage." An eye-opening, and most interesting, approach to the world.

Kirkus Reviews

The funkiest study of statistical mechanics ever by a world-renowned economist... Eye-opening and sometimes eye-popping

Entertainment Weekly

Levitt is a number cruncher extraordinaire.

Philadelphia Daily News

An unconventional economist defies conventional wisdom.

Associated Press

An unconventional economist defies conventional wisdom.

Associated Press Staff

If Indiana Jones were an economist, he’d be Steven Levitt… Criticizing Freakonomics would be like criticizing a hot fudge sundae.

Wall Street Journal

Levitt is one of the most notorious economists of our age.

Financial Times

The trivia alone is worth the cover price.

New York Times Book Review

Levitt dissects complex real-world phenomena, e.g. baby-naming patterns and Sumo wrestling, with an economist’s laser.

San Diego Union-Tribune

The guy is interesting!

Washington Post Book World

A showcase for Levitt’s intriguing explorations into a number of disparate topics…. There’s plenty of fun to be had.

Salon.com

Freakonomics was the ‘It’ book of 2005.

Fort Worth Star-Telegram

An easy, funny read. Many unsolvable problems the Americans have could be solved with simple means.

Business World

Freakonomics challenges conventional wisdom and makes for fun reading.

Book Sense Picks and Notables

Provocative… eye-popping.

New York Times Book Review: Inside the List

One of the decade’s most intelligent and provocative books.

The Daily Standard

Principles of economics are used to examine daily life in this fun read.

People: Great Reads

Provocative… eye-popping.

New York Times Book Review: Inside the List

Principles of economics are used to examine daily life in this fun read.

People: Great Reads

Steven Levitt has the most interesting mind in America... Prepare to be dazzled.

Malcolm Gladwell

"Principles of economics are used to examine daily life in this fun read."

Great Reads - People

Freakonomics is politically incorrect in the best, most essential way.... This is bracing fun of the highest order.

Kurt Andersen