Course Hero. "Freakonomics Study Guide." Course Hero. 13 Feb. 2018. Web. 21 July 2018. <https://www.coursehero.com/lit/Freakonomics/>.
Course Hero. (2018, February 13). Freakonomics Study Guide. In Course Hero. Retrieved July 21, 2018, from https://www.coursehero.com/lit/Freakonomics/
(Course Hero, 2018)
Course Hero. "Freakonomics Study Guide." February 13, 2018. Accessed July 21, 2018. https://www.coursehero.com/lit/Freakonomics/.
Course Hero, "Freakonomics Study Guide," February 13, 2018, accessed July 21, 2018, https://www.coursehero.com/lit/Freakonomics/.
A correlation simply means that a relationship exists between two factors.
Levitt and Dubner go to great lengths to point out the difference between correlation and causation. Here, they point out that while two things can be correlated, their relationship says nothing about how, exactly, they are linked.
Morality represents the way that people would like the world to work.
The intersection of morality, society, and economics is of great concern throughout the book. The authors have chosen topics that raise moral debate: abortion, cheating, crime, and parenting. Yet Levitt and Dubner demonstrate economics does not concern itself with moral prescriptions. Although a social science that takes moral incentives into account, economics is concerned only with the actual stories revealed by data and statistics—not whether they are right or wrong.
An incentive is ... an often tiny object with astonishing power to change a situation.
Incentives are the building blocks of the study of economics, the reasons people think and act in certain ways. Here the authors provide an analogy to show how powerful and ingrained the understanding of incentives is to human behavior. Incentives are often "hidden," although humans learn about them intuitively from a young age. Because they are so ingrained as to seem invisible at times, they have a great deal of power to influence decisions.
Cheating may or may not be human nature, but it is certainly a prominent feature.
Similar to the way Levitt and Dubner address the question of morality, the authors decline to pass judgment on whether cheating is right or wrong—it happens and happens often. Cheating is closely aligned with incentives, which often motivate people to get the most they can for the least amount of outlay. When the incentives are strong enough, the temptation to cheat is greater. The authors leave the morality of cheating to other fields of study but do point out how frequently it occurs.
Information is a beacon, a cudgel, an olive branch, a deterrent—all depending on who wields it and how.
Information is one of the greatest currencies in economics. Indeed, entire industries have been built around experts' hoarding or withholding information to exact a price from the people who need it. Such action puts a monetary value on information in businesses like real estate and life insurance. However, the authors point out with the advent of the Internet, the playing field of information is equalizing.
The point here is not that real-estate agents are bad people.
Again, the authors distinguish between studying the morality versus the economic incentives of decisions. Real-estate agents, for example, are more likely to let their own houses sit on the market longer to make a greater personal profit and sell other clients' houses faster. To a realtor the economic incentive of a sale is far greater than a minimally larger commission—when the property is not theirs and the profit goes to the owner. When the realtor is the owner, however, the personal profit goes directly to the realtor as the seller. In this case agents are merely responding to a basic economic incentive, and the response is not to be considered as morally good or bad.
Conventional wisdom ... must be simple, convenient, comfortable, and comforting—though not necessarily true.
The authors discuss the errors of conventional wisdom at great length, but here they lay out why conventional wisdom is so compelling for people to believe. In a world full of dense statistics and data, people are more likely to seek out simple and obvious answers, particularly ones that reassure them they have some modicum of control over their lives. People are often willing to ignore the data in favor of a "convenient" and "comforting" explanation.
A crack gang works pretty much like the standard capitalist enterprise.
This comparison highlights how ordinary the business of drug dealing is when it boils down to economic facts. In the process, the authors debunk the conventional wisdom that all drug dealers make a lot of money and live lavishly. On the contrary, bottom-level workers in a drug-dealing operation make the same wages as fast food workers. The reason both workers stick around comes down yet again to incentives—the economic incentive to be promoted and move up the ladder.
We have evolved with a tendency to link causality to things we can touch.
Here the authors bring up one of the root causes for belief in conventional wisdom: the reassurance of proximity and control. Because people have a harder time with abstract ideas and issues, they are likelier to reject a demonstrated but distant causal link in favor of a more immediate and convenient explanation.
Fear is in fact a major component of the act of parenting.
Parenting is an area with high incentive stakes. It is a role people take more seriously than nearly everything else in life. These stakes thus allow parenting experts to take unique advantage of the information asymmetry at their disposal and use parental fear as a currency with which to gain power and influence. This same fear also means parents are highly susceptible to the pitfalls of conventional wisdom, which dupes them into believing they have more control over the things they fear than they actually do.
It isn't so much a matter of what you do as a parent.
Parents are desperate to believe their parenting choices, such as reading to their children or taking them to museums, can have an impact on their children's future success. Yet the data the authors have studied show children's likelihood of success in life is determined well before they are born because success has to do with class and socioeconomic status. Such data may be reassuring to some parents and upsetting to others.
Names are seen to carry great aesthetic or even predictive powers.
Along the lines of parenting techniques comes the notion of children's names having a significant impact on their success in life. This idea again seems to boil down to the notion parents can control the kind of people their children will become and can give them a "leg up" in life. Yet the authors debunk this myth, the real truth being success in life aligns with class and socioeconomic status.
Once a name catches on among high-income, highly educated parents, it starts down the socioeconomic ladder.
Sifting through the yearly data on the most popular baby names shows within white culture parents of a higher socioeconomic status tend to give their children unique names as a signal of their elitism. Because conventional wisdom holds a name has the power to shape a child's success, less wealthy parents adopt those names for their own children. Yet the cycle always ends with the names falling out of popularity once they become common.
Parents use [names] to signal their own expectations of how successful their children will be.
Studying the data shows parents seem to have little idea the names they give their children are merely a reflection of their own socioeconomic status. Because parents experience fear about their parenting choices, giving their child a name that signals success seems like one way to control that fear and uncertainty.
But the fact of the matter is that Freakonomics-style thinking simply doesn't traffic in morality.
Although the authors have brought up controversial examples that raise strong moral thinking, they emphasize economics is a science that relies on data above all else. What makes economics compelling as a social science is the clash of economic and moral issues. But the authors are interested in training readers to see past their own moral stances and emotions and to examine, without bias, the facts and data presented.