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Freakonomics: Steven D. Levitt and Stephen J. Dubner Posted 11.01.06 |
Media Notes |
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What connection could there possibly be between sumo wrestlers and schoolteachers? When you study the data as the authors do, particularly as it relates to cheating in high-stakes situations, it's not as far-fetched as it may seem on the surface. And that is precisely the premise of Freakonomics: virtually everything produces unintended consequences as it gains foothold and swirls around in the web of life. The notion that cause and effect may be unrelated in space and time, while harder to grasp initially, reflects the way the real world works, although it's generally the opposite of our typical "enter money, push button, beverage container drops into slot" shorthand expectation. It's an idea that also appeared with several other important premises in Peter Senge's 1990 book, The Fifth Discipline, now a classic in the business management field of systems thinking. In Freakonomics, the distant/subtle-cause-and-effect idea is only one of several cited as belonging to the "very specific worldview" of its author(s) that are explored in the book. The primary one is that "incentives are the cornerstone of modern life," followed closely by "the conventional wisdom is often wrong." Others are that "'experts' — from criminologists to real-estate agents — 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." Doesn't seem like rocket science — or anything you've heard or known about the study of economics, does it? Which may give heartburn to the professional or academic economists in the world, but it brings a welcome whiff of skepticism into the reading of pronouncements citing detailed statistical data. Early on, the authors share their easy-to-understand definition of economics, the reasoning behind economists' studies, and the underlying theme of the book, even while assuring us that they have no such organizing principle. |
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No one seems immune from the almost Pavlovian response to incentives, defined by the authors as "simply a means of urging people to do more of a good thing and less of a bad thing." Whether it's a toddler who learns by painful experience not to touch a hot stove, or the smoker who quits because the tax on cigarettes rises to levels that break the budget, incentives seem to work. In fact, automatic tax withholding from paychecks was the federal government's method of creating an incentive to change behavior when too many Americans were not paying their share of income tax. In noting the "strange and powerful nature of incentives," where "a slight tweak can produce drastic and often unforeseen results," the authors cite Thomas Jefferson, "reflecting on the tiny incentive that led to the Boston Tea Party and, in turn, the American Revolution: 'So inscrutable is the arrangement of causes and consequences in this world that a two-penny duty on tea, unjustly imposed in a sequestered part of it, changes the condition of all its inhabitants.'" Most of the book's examples deal with economist Levitt's main interests: cheating, corruption, and crime. But the ideas also start with asking questions about seemingly unrelated things: "How is the Ku Klux Klan like a group of real-estate agents?" or "Why do drug dealers still live with their moms?" or "Where have all the criminals gone?" or "What makes a perfect parent?" The answers require us to dispense with the "conventional wisdom," a phrase coined by John Kenneth Galbraith, "the hyperliterate economic sage," who "did not consider it a compliment."
And asking questions is a good place to start anything. Whether or not Freakonomics is a book about "real" economics, it offers examples and suggests interestingly useful ideas for considering how the world in front of us came to be the way it is — and what might be involved in creating change. |
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