51 pages • 1 hour read
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
People Do What They Want, Not What We Expect
Economics is the study of the making and distribution of goods and services. Chief concerns among economists are the incentives—things that pull people toward or away from certain behaviors—that lie behind economic activity. A central purpose of Freakonomics is to show that those incentives can be quite surprising. People don’t always act in ways we expect, and that can cause negative outcomes.
The book includes several anecdotes that illustrate this point. Israeli parents were sometimes late picking up their children from daycare; when a $3 fine was introduced, tardiness went up, not down. Real estate agents are good at selling houses quickly, but this is because they make more money if their clients get less for their homes. Sometimes kids do poorly in school, not because they’re unable to do well, but because their peers punish them for getting As.
In other situations, people make persistent efforts to no avail but don’t realize it. Politicians spend large sums of money during electoral campaigns, but the amount spent has little effect on voting outcomes. Parents go to great lengths to provide their children with the best educational resources, but these have little effect; it’s who parents are as people that makes the biggest, if hidden, difference.
Unexpected answers like these are especially interesting and fruitful, not because they’re weird but because they point to new and possibly better solutions to old problems. Discoveries that overturn established theories reveal new vistas for the sciences to explore and point toward new directions for further searching. If no one has noticed these areas, they’re wide open to researchers who are alert for such opportunities.
Surprises come in all shapes and sizes; it’s a good idea to keep one’s mind open, searching for clues and quirks in the data that might suggest entirely new ways of thinking about a problem, which could lead to improved theories about what causes the data to shape up the way it does. Successful new theories, even when they seem offbeat, are more useful than conventional theories that simply don’t work.
Conventional wisdom often gets in the way of new ideas, especially quirky ones, which sometimes get sidelined simply because they’re quirky. The way to overcome such resistance is with a complete and robust use of data, along with an analysis that’s rigorous, accurate, and able to endure the pummeling that new ideas must withstand from competing researchers and theorists.
The Answers Lie in the Data
Data tells stories, if we know how to listen. Within masses of evidence, properly examined, lie answers to many pressing questions about economics and society in general. The task of scientists is to extract interesting and useful conclusions from the masses of information available to them. It’s hard work, and it requires an open mind, but it can produce new ideas and possible solutions to problems that, before the data was collected, often plagued us.
For example, the Early Childhood Longitudinal Study (ECLS), a survey undertaken by the US Department of Education in the 1990s, gathered extensive data on 20,000 children, their families, grades, graduation rates, and so forth; it was hoped this trove of information might reveal some of the deep causes of educational success and failure. Indeed, that data, carefully subjected to regression analysis—a method of extracting individual variables from the data and examining their influence on other single variables—revealed a number of unexpected insights.
Black and White children begin school with essentially the same abilities, but a gap opens up between them; kids whose homes have books do better in school; children with highly educated parents and those with more economically successful parents also do better. Gang activity around inner-city schools interferes with academic success, as does low parental involvement in PTAs. To parents, it seems intuitively sound that taking their kids to more museums, or reading to them every day, will improve their educational outcomes, but the ECLS data shows otherwise.
It’s the value hidden within a careful analysis of these numbers, rather than offhand guesses or popular beliefs, that ultimately tells the story. The authors write, “The answers may often seem odd but, after the fact, also rather obvious. We will seek out these answers in the data” (11).
The KKK was widely considered to have lynched thousands of African Americans over the decades; data analysis showed that the Klan had participated in only a fraction of those killings. This doesn’t exonerate them, but it demonstrates that organizations can derive their reputations from the acts of others, and that seemingly fearsome secret societies are sometimes much weaker than their opponents believe.
The answers to tough social questions can be found not in public posturing or loudly shouted opinions, but within data. The truth comes not from clinging to favored beliefs, but from a cool and rational examination of this evidence.
The Truth Isn’t Always Convenient
New and improved solutions to human problems can run afoul of social resistance in the forms of conventional wisdom and moral posturing.
There’s nothing wrong, per se, about conventions—they can be the glue that holds people together—but they interfere with the growth of knowledge when they become the standard by which competing ideas are judged. Likewise, moral viewpoints are a part of human life and a major portion of how societies govern themselves, but theories on how the world really works shouldn’t be tested by whether they please people’s moral sensibilities.
Ideas spring up in the public mind that quickly become the popular answers to difficult questions. When crime suddenly dropped in the late 1990s, experts explained that this was due to improved policing, tougher sentencing, and the aging population. The authors note, “These theories were not only logical; they were also encouraging, for they attributed the crime drop to specific and recent human initiatives” (3). They also became the conventional wisdom of the time, and anyone who had a different idea risked sharp criticism.
The ultimate problem with the conventional theories on the crime dip was that they didn’t fit the data. An answer that did fit was that legalized abortion removed a large number of unwanted children, along with their propensity for criminal behavior in adulthood, from the population. This answer was unpleasant—it suggests that abortion might be good for society—and it generated great resistance, even moral outrage, from thought leaders.
Author Steven Levitt, who discovered the abortion link, didn’t like the answer either. His purpose isn’t to argue for or against abortion; he leaves that to our conscience. Instead, his job is to point out discoveries that might prove useful in some way. At the very least, such findings can free planners from wasting resources on approaches that, according to statistical evidence, have no influence on outcomes.
The authors acknowledge that claiming “legalized abortion resulted in a massive drop in crime will inevitably lead to explosive moral reactions. But the fact of the matter is that Freakonomics-style thinking simply doesn’t traffic in morality” (210). This doesn’t mean the authors have no moral viewpoint; they simply mean that our ethical views on how we think the world should be are best set aside during the process of learning how the world really is.
Freakonomics isn’t about what people should do; it’s about what people actually do. If the truth about human behavior differs from conventional wisdom, it’s foolish to push it away, even if it threatens the viewpoints of established authorities. This applies equally to moral objections against a discovery, for “when moral posturing is replaced by an honest assessment of the data, the result is often a new, surprising insight” (11). Knowing the truth doesn’t change our ethical view for the world, but it makes our understanding of people more accurate, which helps us deal with them more effectively.New and improved solutions to human problems can run afoul of social resistance in the forms of conventional wisdom and moral posturing.
There’s nothing wrong, per se, about conventions—they can be the glue that holds people together—but they interfere with the growth of knowledge when they become the standard by which competing ideas are judged. Likewise, moral viewpoints are a part of human life and a major portion of how societies govern themselves, but theories on how the world really works shouldn’t be tested by whether they please people’s moral sensibilities.
Ideas spring up in the public mind that quickly become the popular answers to difficult questions. When crime suddenly dropped in the late 1990s, experts explained that this was due to improved policing, tougher sentencing, and the aging population. The authors note, “These theories were not only logical; they were also encouraging, for they attributed the crime drop to specific and recent human initiatives” (3). They also became the conventional wisdom of the time, and anyone who had a different idea risked sharp criticism.
The ultimate problem with the conventional theories on the crime dip was that they didn’t fit the data. An answer that did fit was that legalized abortion removed a large number of unwanted children, along with their propensity for criminal behavior in adulthood, from the population. This answer was unpleasant—it suggests that abortion might be good for society—and it generated great resistance, even moral outrage, from thought leaders.
Author Steven Levitt, who discovered the abortion link, didn’t like the answer either. His purpose isn’t to argue for or against abortion; he leaves that to our conscience. Instead, his job is to point out discoveries that might prove useful in some way. At the very least, such findings can free planners from wasting resources on approaches that, according to statistical evidence, have no influence on outcomes.
The authors acknowledge that claiming “legalized abortion resulted in a massive drop in crime will inevitably lead to explosive moral reactions. But the fact of the matter is that Freakonomics-style thinking simply doesn’t traffic in morality” (210). This doesn’t mean the authors have no moral viewpoint; they simply mean that our ethical views on how we think the world should be are best set aside during the process of learning how the world really is.
Freakonomics isn’t about what people should do; it’s about what people actually do. If the truth about human behavior differs from conventional wisdom, it’s foolish to push it away, even if it threatens the viewpoints of established authorities. This applies equally to moral objections against a discovery, for “when moral posturing is replaced by an honest assessment of the data, the result is often a new, surprising insight” (11). Knowing the truth doesn’t change our ethical view for the world, but it makes our understanding of people more accurate, which helps us deal with them more effectively.
Unlock all 51 pages of this Study Guide
Plus, gain access to 9,100+ more expert-written Study Guides.
Including features:
Related Titles
By these authors
