Book - Freakanomics
Freakanomics
by Steven Levitt and Stephen Dubner
Morality, it could be argued, represents the wsy that people would like the world to work - whereas economics represents how it actually does work. Economics is above all a science of measurement. It comprises an extraordinarily powerful and flexible set of tools that can reliably assess a thicket of information to determine the effect of any one factor, or even the whole effect. That’s what “the economy” is, after all: a thicket of information about jobs and real estate and banking and investment. But the tools of economics can be just as easily applied to subjects that are more - well, more interesting.
This book has been written from a very specific worldview, based on a few fundamental ideas:
- Incentives are the cornerstone of modern life. And understanding them - or, often, ferreting them out - is the key to solving just about any riddle, from violent crime to sports cheating to online dating.
- The conventional wisdom is oftern wrong. Crime didn’t keep soaring in the 1990s, money alone doesn’t win elections, and - surprise - drinking eight glasses of water a day has never actually been shown to do a thing for your health. Conventional wisdom is often shoddily formed and devilishly difficult to see through, but it can be done.
- Dramatic effects often have distant, even subtle, causes. The answer to a given riddle is not always right in front of you. Norma McCorvey had a far greater impact on crime than did the combined forces of gun control, a strong economy, and innovative police strategies. So did, a man named Oscar Danilo Blandon, aka the Johnny Appleseed of Crack.
- “Experts” - from criminologists to real-estate agents - use their informational advantage to serve their own agenda. However, they can be beat at their own game. And in the face of the Internet, their informational advantage is shrinking every day - as evidenced by, among other things, the falling price of coffins and life-insurance premiums.
- Knowing what to measure and how to measure it makes a complicated world much less so. If you learn to look at data in the right way, you can explain riddles that otherwise might have seemed impossible. Because there is nothing like the sheer power of numbers to scrub away layers of confusion and contradiction.
Since the science of economics is primarily a set of tools, as opposed to a subject matter, then no subject, however offbeat, need be beyond its reach.
It is worth remembering that Adam Smith, the founder of classical economics, was first and foremost a philosopher. He strove to be a moralist and, in doing so, became an economist. When he published The Theory of Moral Sentiments in 1759, modern capitalism was just getting under way. Smith was entranced by the sweeping changes wrought by this new force, but it wasn’t just the numbers that interested him. It was the human effect, the fact that economic forces were vastly changing the way a person thought and behaved in a given situation. What might lead one person to cheat or steal while another didn’t? How would one person’s seemingly innocuous choice, good or bad, affect a great number of people down the line? In Smith’s era, cause and effect had begun to wildly accelerate; incentives were magnified tenfold. The gravity and shock of these changes were so overwhelming to the citizens of his time as the gravity and shock of modern life may seem to us today. Smith’s true subject was the friction between individual desire and societal norms. The enonomic historian Robern Heilbroner, writing in The Worldly Philosophers, wondered how Smith was able to separate the doings of man, a creature of self-interest, from the greater moral plane in which man operated. “Smith held that the answer lay in our ability to put ourselves in the position of a third person, an impartial observer”, Heilbroner wrote, “and in this way to form a notion of the objective.. meritss of a case.”
If you ask enough questions, strange as they seem at the time, you may eventually learn something worthwhile. The first trick of asking questions is to determine if your question is a good one. Just because a question has never been asked does not make it good. Smart people have been asking questions for quite a few centuries now, so many of the questions that haven’t been asked are bound to yield uninteresting answers. But if you can question something that people really care about and find an answer that may surprise them - that is, if you can overturn the conventional wisdom - then you may have some luck. It was John Kenneth Galbraith, the hyperliterate economic sage, who coined the phrase “conventional wisdom”. He did not consider it a compliment. “We associate truth with convenience,” he wrote, “with what mose closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life. We also find highly acceptable what contributes most to self-esteem.” Economic and social behaviors, Gaobraith continued, “are complex, and to comprehend their character is mentally tiring. Therefore we adhere, as though to a raft, to those ideas which represent our understanding.” So the conventional wisdom in Galbraith’s view must be simple, convenient, comfortable, and comforting - though not necessarily true. It would be silly to argue that the conventional wisdom is never true. But noticing where the conventional wisdom may be false - noticing, perhaps, the contrails of sloppy or self-interested thinking - is a nice place to start asking questions.
The typical parenting expert, like experts in other fields, is prone to sound exceedingly sure of himself. An expert doesn’t so much argue the various sides of an issue as plant his flag firmly on one side. That’s because an expert whose argument reeks of restraint or nuance often doesn’t get much attention. An expert must be bold if he hopes to alchemize his homespun theory into conventional wisdom. Hes best chance of doing so is to engage the public’s emotions, for emotion is the enemy of rational argument. And as emotions go, one of them - fear - is more potent than the rest. The superpredator, Iraqi weapons of mass destruction, mad-cow disease, crib death: how can we fail to heed the expert’s advice on these horrors when, like that mean uncle telling too-scary stories to too-yound children, he has reduced us to quivers?