Summary of The Freakonomics

Levitt addresses a number of everyday questions in Freakonomics and uses

straight-forward analysis to turn conventional wisdom on its head. The authors of the

novel Steven Levitt and Stephen Dubner maintain that "if morality is how we would

like the world to work, then economics represents how it actually does work." The

authors also show that conventional wisdom is often a convenient way to think about

a problem more than a correct way to think about it. Freakonomics asks some good

questions, and it inspires readers to do the same. Freakonomics lies not in the

answers it gives, but in the revelation that answers exist and can be discovered if

only we know the right questions to ask.

It looks at the world and how it works by exploring “the hidden side of everything.” It

asks fresh, interesting questions like, if drug dealers have so much money, why do

they still live with their moms? Or which is more dangerous, a gun or a swimming

pool? What do schoolteachers and sumo wrestlers have in common? How much do

parents really matter? How did the legalization of abortion affect the rate of violent

crime in USA? Freakonomics explores the hidden side of many common

experiences that everybody comes across.

The Introduction begins with a discussion of how, in the 1990s, experts predicted a

dire and dramatic increase in crime, particularly in murder by teenagers. The

predicted crime wave never happens, and, in fact, crime rates for all types of crimes

begin to plunge all over the country. Experts credit the dramatic decrease to various

factors, such as the robust 1990s economy, gun control laws and smart policing

strategies. The authors however explain that the primary reason for the dramatic

decrease in the crime rate is the Supreme Court's 1973 decision in Roe v. Wade,

which recognizes a woman's constitutional right to have an abortion. As the authors

explain, because of Roe v. Wade, the types of children who are most likely to

become criminals never took birth.

Freakonomics demonstrates how incentives affect human behaviour. Economics is

the study of incentives, which are ways to get people to do good things. There are

three different types of incentives - economic, social and moral. The book states that

sometimes an incentive may have unintended consequences. As an example, the

authors first cite a study of daycare centers in Haifa, Israel, in which a $3 fine is

imposed on parents who pick their children late from the centers. After the fine is

introduced, the number of late pick-ups immediately goes up. The researchers find

that the $3 fine turns out to be a poor incentive for parents to pick their children on

time form school.

The book also talks about information asymmetry. As the book explains, the term

information asymmetry refers to when a person uses his information advantage to

gain an unfair advantage on others. To elaborate the point the author gives a brief

history of the Ku Klux Klan. According to the authors, much of the Klan's power in the

1940s lie in the fact that it maintained so much secrecy in everything it did. After

World War II, a man named Stetson Kennedy lead to the Klan's ultimate downfall by

exposing many of its secrets. Kennedy infiltrates the Klan by becoming a member of

a Klan group in Atlanta, where he learns all of the group's secret rituals, names and

handshakes, as well as its hierarchy and transfers all the information to people

through radio.

The authors explore the topic of names and, specifically, whether a person's given

name affects his or her outcome in life and why people give their babies certain

names to begin with. The authors discuss, more particularly, how blacks and whites

name their babies very differently and whether having a distinctively black-sounding

name affects one's life outcome as most parents believe that the name that they give

their child will affect their child's life outcome and hence there is a pattern in the

names that children have.