Book Review – Freakonomics
In Levitt and Dubner’s Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, the authors discuss a fascinating combination of popular culture and economic theories, making Keynesian economics palatable for the modern sensibility. Looking at various subjects through an economic lens, the authors of Freakanomics essentially state that incentives play a vital part in our interactions with each other, especially with regards to economics. This book is about more than how our economy works – it is about how the world works when viewed as a series of exchanges and incentives. This book is largely in line with my own thoughts, and opened up a lot of interesting points about the way we relate to each other, though there are some things that I do question.
In Chapter 1, the authors talk about cheating and how it is discovered in both the fields of education and sumo wrestling. In short, their main point is that incentives will often have the opposite effect of their intended use; when making up rewards for someone doing something, they may often find a greater reward by not doing it. For example, the No Child Left Behind emphasis on standardized testing is meant to force educators to work hard in order to get their children up to a certain level of academic achievement. However, all this means is that teachers are cheating the tests in order to get the bonuses they get from getting the standardized test scores. As a result, this incentive for achievement does not work as intended, and people benefit monetarily from it. Sumo wrestlers are shown to do a similar thing, stating that they often rig matches for other wrestlers in their group in order to sabotage other groups. These points are very fascinating, though solutions are not really provided. If incentives often have the opposite effect, what are we meant to do? Suggesting alternatives would go a long way towards helping the book have a more centralized point.
In Chapter 2, consumers are shown to suffer from a lack of information needed to make sound economic choices – in essence, the rich and powerful companies often will benefit from the exchange of secret information that allows them to profit, often at the expense of the consumer. When some people know more information than others, those with the information come out ahead while others suffer. This is related with the story of Stetson Kennedy, the man who snuck into the Ku Klux Klan, learned their secret codes, and gave them to radio broadcasters in order to disseminate through the popular Superman radio shows that were airing at the time. This was a majorly egalitarian move, as it removed the scarcity of knowledge that the Klan needed in order to survive. Real estate agents are also said to profit from secret information; one point that I admired the most was the author’s ability to provide alternatives in this chapter, namely with the suggestion of using the Internet to research and gain that information real estate agents withhold from the public.
I agree with many of the points made in the book, especially the use of information as an economic commodity, and the importance of making it available as much as possible to the public. In order to have a more equalized and fair economy, it is vital for everyone to be on a level playing field; the existence of secret networks of information that is not made available to the public makes it easier for wealth inequality to occur, and Freakonomics does a good job of making that point clear. I also agree that incentivizing actions can be problematic, as people will always look for ways around the system; people will always look for the easy way out. In the case of Chapter 3, this hoarding of information even extends to criminal enterprises, as the authors discuss how some gang members live with their mom, as they often have the same hierarchical organizations as corporations.
There are some points that I disagree with in the book; I particularly took umbrage with Chapter Four, in which the use of abortion is said to be a factor in the reduction of crime in major cities. Their claim is essentially that, since these mothers who got abortions lived a certain lifestyle, their children would have grown up to become criminals as well. I find this a very reductive and insulting point of view, as we do not know anything about how these individual people lived. Abortions are not restricted to people of loose moral character or people who are low-income; people of all ages and socioeconomic levels have abortions. Furthermore, it is a useless comparison to make, as mothers were not inspired to have abortions for the sake of lowering crime levels, but out of necessity for themselves and the child. While there is a correlation between low-income or single-parent living and crime, one does not cause the other, and I feel it is disingenuous to compare them both.
Chapter 5, the chapter on being a perfect parent, was also a bit strangely classist; in essence, the authors argue that you must be rich and highly educated in order to be a perfect parent. Even if this were true, it is a strange accusation to make, as it ignores both the perfectly fine parents who are not rich or have PhDs and the completely rotten rich parents who certainly exist. This kind of characterization seems elitist and reductive, regardless of the research, and articulating it in this way does no good to anyone considering the deeply entrenched wealth inequality in this country. While children of richer parents do have better economic and social outcomes, this is not necessarily because of the quality of parenting; instead, they have simply benefited from greater socioeconomic opportunities.
There are a couple key ideas that I really took away from this, and they were covered in Chapters 1 and 2. The idea of incentives not working out, and the scarcity of information keeping elite groups on top, are ones that deeply affected my understanding of the world. Knowing that incentives are sometimes problematic, it makes me wonder what we could do to actually get people to do things if they don’t work. The second key idea also let me know just how helpless those without information can be. E.What ideas do you wish the author had spoken about or spent more time on? Why?
I wish the authors had spent more time on productive solutions for the problems they set out in the book. There are many different problems that they mention, but these are simply accepted as hard truths, things we must simply get used to. The powerful will know more than you, giving your child a stereotypical name will make people think less of them, etc. are all things that happen, but the authors do not do much to help you overcome that. Chapter 2 has readers use the power of the Internet to gain that information, but the rest of the points made are shrugged off as brutally honest admissions that the rich will get richer and the poor get poorer. Ways to overcome that would help give this book more utility rather than just as a reminder of how helpless the middle class is.
Reading this book has made me think quite a bit about the way we interact with each other. It reminds me of the prejudices we often have against each other (like having a low opinion of people named Shurkora of Shytravia), as well as the various challenges people of color or low socioeconomic status have compared to those who do have it well off. These opinions are ones that I have had, but they are simply more firmly entrenched by the book’s research and discussion of them. Nothing in the book is a true surprise, but it merely explains a great deal of the problems that we have as a society.
In the end, I would say that I can recommend Freakonomics to others; the book’s lessons may be sobering and even a little unhelpful, but at least they are honest, and there is a good deal to discuss within them. Whether people agree with it or not, it is a book that fosters discussion, and that is always a good thing when sizing up the way we relate to our world. People who read this book will either have their mind blown or their fears affirmed; either way, it provides insight into the economic way we relate to each other, and how rich-vs-poor affects society even more than we might think.
References
Levitt, S.D., & Dubner, S.J. (2005). Freakonomics. William Morrow.
