Stephen Levitt’s Freakonomics, is a Fascinating Study of Economics Filled With Interesting Facts and Insights

chillibreeze writer — Shalini Bahadur

Freakonomics

A Rogue Economist Explores the Hidden Side of Everything

-Steven D. Levitt and Stephen J. Dubner

Freakonomics delves into the study of economics with gusto, making it more of a creative science than a study of dry facts. Steven Levitt describes economics as a science of measurement, comprising of tools that evaluate information to forecast effects, trends, spending, living standards and lifestyles and just about everything else. Levitt argues that “Morality represents the way people would like the world to work-whereas economics represents how it actually does work.”

What is Freakonomics all about?

Freakonomics is based on certain principles:

1.Incentives are the cornerstone of modern life

Understanding incentives or what makes certain things work the way they do is the key.

2.Conventional wisdom is often wrong

It is often the most quoted answer but that does not necessarily mean it is correct.

3.Dramatic effects often have distant, even subtle, causes

Roe vs. Wade has had more effect on lowering crime than better policing and gun control, although no one had connected the dots between the two.

4.Experts use their informational advantage to server their own agenda

With the wider reach of the Internet, this advantage is reducing, especially for items like insurance policies and coffins.

5.Knowing what to measure and how to measure it makes a complicated world much less so

An economist has to be able to look at the data the right way to recognize the signs, make connections and solve problems.

Steven Levitt uses patterns to recognize and interpret problems. By picking up the undercurrent of society, Levitt asks questions and comes up with some very surprising answers. He correlates events and items that seem to have absolutely nothing in common, but his diligent research uncovers lots of similarities between amazingly disparate groups of people like, schoolteachers and sumo wrestlers or the Ku Klux Klan and real estate agents.

Freakonomics’ most profound pronouncement was concerning the dropping crime rate in the early 1990s in the US. Crime had been steadily rising in the country, when it suddenly and sharply began to drop. Experts had been so sure of its continued rise that most did not even realize that it was falling until a few years later. Soon it became conventional wisdom as television anchors and analysts said that the reduction in crime was due to stricter gun control, better policing, aging of the population, and the strong economy, but no data or reports were studied to come to this conclusion.

What had made the difference had happened over 20 years earlier, an event that no one had correlated. In 1970, a young woman named Norma McCorvey wanted an abortion, but it was illegal to get one. The twenty-one year old had already put up two children for adoption. She was poor, uneducated, unskilled, an alcoholic and a drug addict. Norma was made the lead plaintiff in a class-action lawsuit to legalize abortion under the alias Ms Roe against Henry Wade, the Dallas County District Attorney. The court ruled in her favor in 1973 and abortions were made legal across the US.

The effect of Roe vs. Wade was felt one generation later in the drastic reduction of crime rates from the early 1990s. A large chunk of the population suddenly didn’t exist, specifically the part of the population that was born to poor, teenaged mothers in the least advantageous circumstances and were more likely than average to become criminals.

By connecting invisible dots between seemingly random causes and effects, Steven Levitt makes the study of economics seem fascinating. The book is a must read for all those who are curious about everything from the mundane to the complicated. It is a treasure trove of insights and little known facts on the workings of modern American life.

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—About our writer:

Shalini says, "An eternal student, I love learning anything new. I'm addicted to reading, word games, puzzles, traveling and researching trends. Bliss to me is to curl up on the couch with a good book/good site and a cup of cocoa. Currently working as an assistant manager in Retail Operations with a Children's wear retail chain called Gini and Jony. She is an NRI with a BSc degree in Clothing and Textiles from Kansas State University and worked with JCPenney and K-Mart before deciding to return to India."

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