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Transcript of Freakonomics Presentation
CHAPTER 5: WHAT MAKES A PERFECT PARENT?
CHAPTER 4- WHERE HAVE ALL THE CRIMINALS GONE?
CHAPTER 3- WHY DO DRUG DEALERS STILL LIVE WITH THEIR MOMS?
CHAPTER 2- HOW IS THE KU KLUX KLAN LIKE A GROUP OF REAL ESTATE AGENTS?
introduction: the hidden side of everything
FREAKONOMICS: THE HIDDEN SIDE OF EVERYTHING
Freakonmomics was written in 2005 as a collaboration by Steven D. Levitt, a young and upcoming economist, and Stehen J. Dubner, a journalist for The New York Times.
It is a non-fiction book.
The book is a collection of articles combining economy with many other subjects, such as morality, information control, parenting, sociology and more.
Freakonomics was a #1 New York Bestseller.
The booming success of the book led to an expansion of the Freakonomics franchise.
A follow up book, SuperFreakonomics, was published in 2009.
Freakonomics: The Movie was released in 2010.
The authors still carry on a blog and a radio show discussing further discussing curious questions and situations in society.
Both men also travel the country performing lectures about the book's matierial.
CHAPTER 6- PERFECT PARENTING II, OR: WOULD A ROSHANDA BY ANY OTHER NAME SMELL AS SWEET?
EPILOGUE: TWO PATHS TO HARVARD
CHAPTER 1- WHAT DO SCHOOL TEACHERS AND SUMO WRESTLERS HAVE IN COMMON?
The introduction uses a few of the topics from the book to familiarize readers with the unique thought process used in the book. The authors state that Freakonomics uses observations and patterns of data to begin "stripping back a layer or two from the surface of modern life and seeing whats happening underneath."
They also distinguish that economics is how the world actually works, and how it can be utilized to learn more about other subjects. The reader learns of the fundamental basics upon Freakonomics is built:
Incentives are the cornerstone of modern life.
The conventional wisdom is often wrong.
Dramatic effects often have distant, even subtle, causes.
Experts use their informational advantage to serve their own agenda.
Knowing what to measure and how to measure it makes a complicated world less so.
"If you learn to look at data in the right way, you can explain riddles that otherwise might have seemed impossible. Because there is nothing like the sheer power of numbers to scrub away layers of confusion and contradiction." -page 13, paragraph 1
In this chapter, Levitt applies economics to three instances in which cheating are present- teachers dealing with high-stakes tests, sumo wrestlers, and a bagel business working by an honor system. In order to do this, he evaluates the incentives in each situation and how people react to them. The book claims that economics, in its entirety, is the study of incentives. It then tells of the "three basic flavors" of incentive- economic, social and moral. All incentives have one goal, leading people towards doing more positive actions and less negative ones.
Levitt linked Chicago Public School teachers to Japanese sumo wrestlers through their common habit- cheating. Both parties were driven to fraud by incentives. The school teachers needed their class to score high during state testing in order to keep their jobs (a poor scoring school was often put on probation or closed), and maybe even get a raise or promotion. The sumo wrestlers fought for their national ranking, which determines pay, housing, fame and the overall lifestyle of a wrestler. Both groups went to extreme measures to assure they would obtain the incentives, 5% of Chicago teachers changed answers on their student's tests while at least 28 of the 66 elite wrestlers
Another situation Levitt and Dubner investigated was one of a Washington D.C. resident named Paul Feldman. Feldman started a business selling bagels to companies on an honor system. He left bagels and a box for money, and kept tally of the payments made by all the companies he catered to.
Feldman's records show a rare glimpse into white collar crime. From his data, many psychological conclusions were met. Many of those were related to a sense of entitlement company workers held. Although money boxes were almost never stolen, bagels went unpaid for 10-20% of the time. Feldman also noticed that higher-up corporate professionals paid for their bagels far less than the employees of a small business. Feldman also determined that pleasant weather and patriotic holidays tended to lead to a higher payment rate, while bad weather and stressful hoidays (such as Christmas and Valentine's) led to lower payment.
Overall workers were 89% truthful about their bagels, which Levitt claims is the percentage of time in which people are honest and good naturally.
"The typical economist believes there is not a problem that he cannot fix if given a free hand to design the proper incentive scheme." -page 16, paragraph 2
Chapter 2 is centered around information control.
It starts by telling the tale of a man named Stetson Kennedy, who came from an important Southern family with ties to the Ku Klux Klan. Despite his heritage, Kennedy was strongly opposed to the KKK. Despite the plethora of information he and his inside connection, a like-minded man nicknamed John Brown, gained, Kennedy was unable to find a way to bring down the group efficiently. Then, he began leaking KKK secrets to popular radio shows. As the public was informed of all the important rituals, inner-workings and events of the group, the KKK lost attendance at meetings and new members. Kennedy had broken down the group by making their precious secrets well known fact, and gave the public the power to openly mock and oppose the KKK.
Levitt compared the KKK to people such as stockbrokers or real estate agents. "Experts" such as those rely on their exclusive knowledge to make money, and quite often, take advantage of the uneducated. People pay them for the information that only they have.
Real estate agents are trusted to be able to sell a home for a seller quickly, easily and for the best price possible. Agents specialize in the "conversion of information to fear." A seller fears without an agent, they won't be able to sell their house. Sellers are so afraid that they trust the agent to work the biggest financial transaction of their lives. Unfortunately, agents aren't always looking out on getting the highest bid for a house. The commission an agent earns on a house is such a small percentage that waiting for a house to sell for an extra $20,000 will not bring the agent much more than its original price. This means that quite often real estate agents are more concerned with wrapping a sale up, taking the commission and moving on to the next house, instead of "getting the best price possible." Since the average homeowner is unaware of how real estate works, they do not know that they got tricked out of extra money, which is how real estate uses its knowledge for profit.
The authors then compare such information control to that of online dating profiles, and how manipulating a person's flaws and characteristics can lead to hightened interest from potential dates.
The gulf between the information we publicly proclaim and the information we know to be true is often vast.- page 82, paragraph 1
Chapter 3 is opened with an assesment of truth and "conventional wisdom." The Authors quote John Kenneth Galbraith, who originally coined the phrase "conventional wisdom." Galbraith did not mean it as a positive phrase, instead conventional wisdom is the information widely accepted because it is what is wished to be true.
An example in which conventional wisdom is actually inaccurate is regarding the crack cocaine empire. During the cocaine boom in the 1900s, police reported that they were at a severe disadvantage towards drug dealers, who possessed infinte resources and weapons due to their large paychecks.
After the authors evaluated the data collected by Sudhir Venkatesh. After stumbling into a college-educated man present in the cocaine industry, Venkatesh spent plenty of time in the midst of the Black Disciples, a coke-dealing gang. During this time, he discovered that only people high-up in the hierarchy of the drug dealing industry actually made good money. Meanwhile, the dealers on the streets, who police had claimed had state-of-the-art equipment and humongous profits, made as little as $3 an hour, while enduring a 1 in 4 risk of being killed on the job.
Levitt and Dubner also debunked other statistical myths. They found that women's activists dramatically exaggerated the occurrence of sexual assault, Atlanta police underreported crime in order to host the Olympics, and only the top 2.2% of people in the crack industry lived the high life.
The moral of this chapter was to look past what society would like the statistics to be, and give a second look into "conventional wisdom", because quite often, common knowledge is manipulated and morphed into what the public would like to see.
"But noticing where the conventional wisdom may be false- noticing, perhaps, the contrails of sloppy or self-interested thinking- it is a nice place to start asking questions." - page 86, paragraph 1
In this chapter, Levitt and Dubner deal with a very controversial topic- abortion and it's effects on society. In the introduction, abortion's influence on national crime rates was brushed over. In this chapter, the topic is further analyzed.
During the late 1980s, crime in the US was rampant. Criminologists predicted a further increase in crime, and told the nation to prepare for a new generation of criminals. However, in the early 90s, crime dropped drastically, steadily decreasing into similar crime rates of the past.
People were confused by this unforeseen change. Experts attributed it so many factors, changes in law-enforcement, new legislature, the economy, and many more. Levitt evaluated all of the popular factors named by newspapers, and showed that only three could be proven to have assisted in the crime drop. Even so, they could not be responsible for such a drastic change.
Levitt argues that legalized abortion is the dominant cause of the crime drop. In his arguement, he states that all women who wanted an abortion prior to Roe v. Wade but had to have the child often had reasons for not wanting the child. These woman likely were in bad situations and they brought children into the world who would grow up with the poverty, violence, drug use, or instability that caused the mother to want an abortion in the first place. These kids would be at a higher risk of turning to crime.
But since Roe v. Wade, women were bringing less children into undesirable circumstances, which was leading to less criminals, and less crime.
"What the link between abortion and crime does is this: when the government gives a woman the oppurtunity to make her own decision about abortion, she generally does a good job of figuring out if she is in a position to raise the baby well." -page 145, paragraph 2
In this chapter, the authors almost mock the conflicting and often dramatic views of "parenting experts." Levitt applies the principles of economics and statistics to challenge many stereotypical decisions made by parents.
First Levitt challenges the decisions parents make regarding their childs safety. He talks of an imaginary girl, Molly, whose parents forbid her to go to her friend Amy's house, because Amy's parents own a gun. Instead, Molly is allowed to play in her friend's pool. Levitt applies statistics to the situation, and reveals that a child drowns in every 11,000 pools in the US, yet only 1 child is killed by every 1,000,000 guns.
Levitt also examines who has the most sucess raising a child. His claims assure that who you are as a parent is much more import than what you do. By looking at children with high standardized test scores, Levitt reveals patterns in the parents of sucessful children. Positive parental traits include high education, high socioeconomic status, English as a main language, PTA involvement, has books at home, and had the child after the age of 30. Levitt discusses the connections between these and other stereotypically positive traits of parents and the effects they have on children.
"Here's the conundrum: by the time most people pick up a parenting book, it is far too late. Most of the things that matter were decided long ago- who you are, whom you married and what kind of life you lead." -page 178, paragraph 1
In this chapter, Levitt and Dubner build onto the idea of parenting and how it ultimately influences a child. In addition, several theories about racial differences are addressed.
During this chapter, Levitt uses data to investigate the link between names and the economic future of the child. Levitt did this in lieu of the increasing amount of ethnic African-American names in the United States.
Many people have ran "audit studies" to discover the connection that these ethnic names have with employment and economoics. In these studies, fake resumes sporting "white names" were more likely to be given the job than "black-sounding names." This is because the stereotypical African American names are associated with low class, undereducated people.
Next, Levitt tracked the life stories of many women who had given their child classically black names. This analysis concluded that people given ethnic names were more likely to have a poorer quality of life. However, this was not due to race. Levitt concluded that "the kinds of parents who name their son Jake don't tend to live in the same neighborhoods or share economical circumstances with the kind of parents who name their kid DeShawn."
Levitt also evaluated how white names become popular. The circulation of a name regularly starts with a highly educated couple giving their child an obscure name. This child is likely to lead a high-quality of life due to his or her parent's socioeconomic background. Because of this, other families begin to popularize the name. Eventually, parents of a lower socioeconomic status use the names, which signals a downfall in popularity as new names from the upper class begin to spread.
"What the California data suggests is that an overwhelming number of parents use a name to signal their own expectations of how sucessful their child will be. The name isn't likely to make a shard of difference. But the parents can feel better knowing that, from the very outset, they tried their very best." -page 207, paragraph 1
In the closing pages of Freakonomics, the authors summarize the unusual questions and answers that readers have observed through out the book. They state their hope that readers have learned some interesting new information that they can put to work in reality. Most importantly, they encourage readers to live their lives like a Freakonomist, questioning things around them and knowing how to find the answers.