Book Review – Freakonomics: Revised and Expanded

Sometimes, a book manages to catch attention outside of the small group of people who would seem to be its natural target.  The Harry Potter books, for example, were written as children’s stories (well, some of the latter ones started to cover much more adult material, but you know what I mean), but have ended up being incredibly popular with, well, just about everyone (myself included).  It’s impressive when books are able to leap out of their genres like that.

Freakonomics has managed to do something similar: getting the average reader interested in economics.  What would seem to be a fairly dull topic has managed to sell millions of copies of the book, warranted a sequel (just one so far), sparked a website, and gotten its writers repeated spots on NPR, among many, many other appearances.  So, what’s going in this book that has caught so much attention, and is it worth a read?  As always, let’s read on to find out!

Summary

The revised and expanded edition of Freakonomics opens with several introductory section.  First is an explanatory note, detailing how Stephen Dubner, journalist, and Steven Levitt, economist, first met and ultimately decided to work together on the book (and eventually, the aforementioned related projects).  Then, there is a preface, noting some of the changes from the original publication of Freakonomics.  Finally, there is the introduction, providing a brief guide to some of the issues discussed in the book, from the link between legalized abortion and a falling crime rate to the power (or rather, lack of power) of money to influence elections.

The first chapter opens by discussing the concept of incentives as they relate to economics.  There’s a discussion of the different types of incentives, namely economic, moral, and social, and how they can work together (or not) to deter crime and other undesirable behavior.  The rest of the chapter discusses some instances of how incentives affected people’s behavior, from the way that high stakes testing of students as a result of laws like No Child Left Behind has created higher incentives for teachers to cheat to sumo wrestlers allowing their fellow wrestlers to win when it can really help those fellow wrestlers to improve their rankings (in return for easy matches against those same fellows when next they meet).

Chapter two looks at the power of information asymmetry, when one person or group knows more than another person or group, and uses that information to their advantage.  The chapter starts by showing how losing that advantage can take away much of your power, by looking at how the Ku Klux Klan was (largely) taken down by a dedicated attempt to share their secrets.  The chapter covers several other examples of how information asymmetry plays a role in our lives, including how compensation for real estate agents ensures that they are more concerned with moving real estate quickly, rather than shooting for the highest possible price.

Chapter three talks about conventional wisdom, and asks why drug dealers still live with their moms.  The answer was surprisingly simple (only the top members of a drug organization make big money, the rest are paid very little, frequently less than minimum wage), and explodes the common myth of all drug dealers making large amounts of money.  The chapter continues, telling of the rise of crack cocaine and the resulting street crime that seemed ready to overtake the country, at least, until…

…the results of legalized abortion started to be felt.  If you’ve heard only one thing about the subjects in Freakonomics, it’s probably the claim that legalized abortion in the United States in 1973 is the biggest reason that crimes began a substantial decline in the early nineties (and still remain much lower today than in the past, particularly in the eighties).  The book covers several of the other explanations for the decrease in crime, noting that they are at best too insignificant to explain the total drop, and at worst, didn’t have any effect at all, and notes all the evidence indicating that more abortions led to less crime two decades or so later.  (The authors do express being ‘jarred’ by this revelation; they weren’t attempting to celebrate it.)

The fifth chapter covers some of the issues that face parents, and the fear that many parents feel as they try to raise their children ‘right’.  It explains how data on thousands of students was gathered in the Early Childhood Longitudinal Study, and how that data was subjected to regression analysis to tease out the useful correlations.  It was found that many of the things within a parent’s control (how much television was watched, whether the child is spanked) DON’T have a correlation with higher student test scores, while many factors that aren’t really in the parent’s (direct) control (age of the mother, whether the parents are educated, if they have a high socioeconomic status) tend  to show a correlation.  Not the best news for parents looking to give their children an edge in school.

The sixth and final chapter looks at what, exactly, is in a name, using data from California names registration to trace the success of people with a variety of names.  There was a decided tendency for names associated with the wealthy, successful, and otherwise well off to end up being given to larger and larger portions of the population, before becoming highly unpopular again.  Basically, names given by the upper class to their children would be associated with wealth and power, be given to the children of middle class families, then to children of lower class families, become associated with a lack of success, and then die out (before sometimes becoming popular again).

The rest of the Revised and Expanded edition provides some interesting additions as bonus material.  There’s the original New York Times Magazine article from Levitt about Dubner, which eventually led to their co-writing of this book.  There are seven Freakonomics articles covering issues from the decline of crack cocaine use to the lack of economic benefits to voting.  Lastly, there are over forty pages of excerpts from the Freakonomics blog, covering everything from a discussion of Freakonomics itself to some random reflections on a variety of subjects.

Pros

Freakonomics is definitely an interesting read, providing a very different way of considering the world from what many of us think.  The conclusions (and there are many more issues discussed than I had space to cover here) are quite interesting, and the research seems quite thorough.  There’s a LOT of different studies covered and reviewed, all referenced at the end of the book.  As a way to stretch your mind and get you thinking about the world, it works quite well.

Cons

Not too much to complain about, although with some of the points made, the direct links that the book proclaims seem less certain than the authors portray them.  As I’ve said already, correlation is not causation, and since it’s impossible for economists to, say, control the number of abortions that are performed by a particular population, it’s hard to say with absolutely certainty that more abortions lead to lower crime rates, or prove any of the other assertions made in the book.  Take the results in the book with a grain of salt.

Overall

Freakonomics is a very interesting and thought provoking book.  It provides a rather unique outlook on the world, and it gives plenty of background to help support its points.  It also makes for very entertaining reading, always a plus for economics books.  Definitely worth a read.

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