Freakonomics: A Rogue Economist Explores the Hidden Side of Everything Summary

Stephen J. Dubner, Steven D. Levitt


(Literary Masterpieces, Volume 5)

Steven Levitt obviously overstates the breadth of his work in the subtitle of Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, but he can be forgiven in his zealousness. He claims to be founding “freakonomics” as a new field of study, one that asks unusual questions that others fail to see or to embrace. Within that context, a claim that freakonomics explores “the hidden side of everything” is not so exaggerated, and social scientists within many disciplinespolitical science, sociology, and economics among themhave attempted to construct overarching theories that capture most of what they see as the important dimensions of the world. Within this volume, however, Levitt explores only a few topics to illustrate the kinds of issues that can be addressed using his approach.

In stepping outside what are commonly accepted as the boundaries of the field of economics, Levitt actually steps back a century or two into the past. Before economics was recognized as a discipline in its own right, it was part of what was called political economy, which encompassed both politics and economics, among other areas. Even further back, the types of questions Levitt studies were considered part of “moral theory”; Adam Smith, now recognized as one of the key figures in early economics, also wrote on what he called the theory of moral sentiments. Levitt seems to acknowledge this history, at least subtly: The table of contents for Freakonomics recalls a nineteenth century work. After each chapter title is a brief statement of the chapter’s contents, then several phrases indicating key points made in the chapter. There are no subheadings within chapters, and in fact the material within each chapter blurs together, sometimes leaving the reader wondering how Levitt makes the leap from one topic to another.

In fact, it is not always clear who is writing and whose research is being reported. Before each chapter appears a short excerpt from an article about Levitt written by coauthor Stephen Dubner for the August 3, 2003, issue of The New York Times Magazine. The chapters themselves report Levitt’s research results and theories both from his and from an outsider’s (Dubner’s) perspective. Much of the time, data sources are not attributed in the text, so it is not always clear if research is Levitt’s (rarely), is coauthored by Levitt (commonly), or, in the case of some minor results, is someone else’s entirely (acknowledged in the source notes at the back of the book).

What, then, is Levitt attempting to do with his new field of freakonomics? He states that he is taking economics back to its basics, as a study of incentives and the ways in which people attempt to get what they want, given that scarcity and competition exist. Levitt stresses that he is exploring how the world really works, rather than examining issues of morality or how people would like the world to work. The text is markedly nontechnical, with no equations and only a few summaries of data. Levitt seems to ask the reader simply to trust him that the data actually show what he claims, although the extensive notes to the book do provide citations to academic papers (his and others’) containing more complete analyses. Levitt thereby both invites nonspecialists into his field of study and opens his analysis to scrutiny by those who wish to delve deeper.

Chapter 1 begins with a brief discourse on incentives. Levitt believes that most incentives do not arise organically; instead, someone had to invent them, with some goal in mind. This opens the question of whether such artificial incentives actually do achieve their goals. He gives an example of a day-care center faced with the problem that some parents were late picking up their children. The center decided to levy a small fine each time a child was picked up late. The result was that parental tardiness increased; apparently, parents balanced the small fine against their own inconvenience in being on time and decided that the cost was worth it. The fine also may have converted a social or “moral” issue (“I should pick my child up on time because it’s the right thing to do”) into an economic one (“How much will it cost if I am not on time?”). Throughout the book, Levitt stresses that types of incentiveseconomic, social, and moraloften play off or replace one another.

The example raises the issue that when rules are set, cheating often follows. Levitt expands on this concept in an...

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Freakonomics: A Rogue Economist Explores the Hidden Side of Everything Summary

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything is the result of a partnership between a journalist, Stephen J. Dubner, and a University of Chicago economist, Steven D. Levitt. The two explain that the premise of Freakonomics sprung from an assignment Dubner received from New York Times Magazine to write a profile of Levitt. While interviewing Levitt, Dubner found that unlike other economists whom he had interviewed, he actually understood Levitt’s quirky yet effective way of explaining statistics. The two developed mutual respect, which resulted in their writing the best-selling book.

Introduction: The Hidden Side of Everything

In Freakonomics’s introduction, the authors discuss that statistics and subjects that normally seem dissimilar share commonalities when examined more closely and when the right questions are asked. Near the end of the introduction, a preview of the book’s themes appears, and Levitt and Dubner establish their satirical and conversational tone found in each chapter.

Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?

According to the authors and the statistics they research and report, the answer to the title’s chapter is cheating, though the entire chapter is not about cheating. It begins by discussing the human need for incentives—categorized as economic, social, and moral incentives. The authors use the examples of a daycare in Israel incorporating a fine to motivate parents to pick up their children on time to define what a typical incentive looks like in everyday life. The discussion then turns to cheating and how incentives can encourage dishonesty. They discuss the Chicago Public School System as their first example of the connection between incentives and cheating. In 1996, the school system instituted bonus pay based on the standardized test scores of teachers’ students. If a teacher’s students demonstrated significant gains on their test scores, the teacher received a monetary bonus. Researchers found after studying score results from 1993–2000 that a spike in cheating occurred in 1996. A three-year study showed that on average cheating occurred in at least 200 Chicago classrooms per year. Levitt and Dubner then compare the number of cheating teachers to sumo wrestlers who work collaboratively to throw matches because, in the end, more of them benefit from having similar records.

The final portion of the chapter focuses on moral incentives and features Paul Feldman, an entrepreneur with a small bagel business. For years, Feldman has delivered bagels to the workrooms of various businesses. He runs his bagel business on the honor system by listing the price of a bagel and providing a moneybox for his customers. Feldman has kept meticulous records of the rate of payment he receives (normally around 87%), the types of businesses that seem to be more honest (small offices), and the times of year when people seem more inclined to take bagels without paying for them (holidays). The authors’ and Feldman’s conclusion is that in general humans are honest even when no one is watching them—thus, the power of a moral incentive.

Chapter 2: How Is the Ku Klux Klan Like a Group of Real-Estate Agents?

Although Chapter 2 in no way suggests that real-estate agents are hooded racists who terrorize the innocent, it does discuss how access to information creates power for the informed. Much of the chapter discusses the history of the Ku Klux Klan (KKK) and an activist’s (Stetson Kennedy’s) efforts to destroy the Klan. Kennedy, the author of a book titled The Klan Unmasked,claimed that he infiltrated the KKK in the 1950s. Even though the authors later discovered that Kennedy worked with a man code-named John Brown, and that Brown was actually the one who attended the meetings, they keep Chapter 2 as it is in the revised edition of Freakonomics because many of Kennedy’s facts about the Klan are true. What Kennedy discovered about the KKK and later revealed to anyone who would listen is that the Klan was not nearly as powerful as it liked to appear. In fact, it was little more than a “slick money-laundering operation” by the 1950s. The KKK relied on an established reputation of violence rather than actually carrying out numerous acts of violence. In truth, the Klan’s power rested in the information it received from members or associates and then hoarded for the benefit of a few. Kennedy was successful in “sharing” most of this information with the public via the radio, which ultimately resulted in a widespread decrease in the Klan’s membership and in its losing the advantage of being able to hoard information.

After concluding the KKK example, Levitt and Dubner use statistics to demonstrate that real-estate agents also make a profit by hoarding information. For example, for a house that sells at a high price, agents use descriptive terms that provide specific information (i.e., granite, state-of-the-art, or Corian). In contrast, lower sales prices are associated with generic terms (e.g., fantastic, charming, or spacious). The agent’s decision about what kind of...

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Freakonomics: A Rogue Economist Explores the Hidden Side of Everything Bibliography

(Literary Masterpieces, Volume 5)

America 193, no. 6 (September 12, 2005): 25.

Booklist 101, no. 18 (May 15, 2005): 1622.

Commentary 120, no. 1 (July/August, 2005): 67-69.

The Economist 375 (May 14, 2005): 85-86.

Kirkus Reviews 73, no. 6 (March 15, 2005): 337-338.

Library Journal 130, no. 8 (May 1, 2005): 98.

The New York Times Book Review 154 (May 15, 2005): 12.

Publishers Weekly 252, no. 11 (March 14, 2005): 53-54.

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