Freakonomics - Deepstash
Freakonomics

Freakonomics

Steven D. Levitt

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INCENTIVE

INCENTIVE

….. simply a means of urging people to do more of a good thing or less of a bad thing.

Economics ultimately boils down to the study of incentives. Incentives are all around us, whether natural or manufactured (like by a parent, teacher, boss, politician or economist).

Three kinds of incentives:

  1. Economic: doing something to increase your wealth.
  2. Social: doing something to affect how others perceive you.
  3. Moral: doing something because of your sense of right and wrong.

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Moral Incentives

Moral Incentives

A day-care center wanted parents to pick up their kids on time, so they levied a $3 fine for parents who were late. However, the number of late pickups actually doubled.. That’s because the fine was too affordable, sent the wrong signal that being late wasn’t a big deal and removed the parents’ guilt of being late. Without a moral incentive, parents continued to be late even when the $3 penalty was removed.

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Why do drug dealers still live with their moms?

Why do drug dealers still live with their moms?

  • Steven debunks the myth that drug dealers are all rich. In reality, crack gangs are very similar in structure to any business in corporate America, with a small number of people on the top making big money and hundreds of people on the bottom barely scraping by at all.
  • These people stay in the business because of the prospect of potentially moving up and making it big one day, which is the mentality that drives people like athletes and entertainers trying to move up as well.

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What do schoolteachers and sumo wrestlers have in common?

What do schoolteachers and sumo wrestlers have in common?

  • Because of high-stakes testing, schoolteachers in Chicago public schools were incentivized to change their students' answers on test answer sheets so that they would not be fired or penalized for the poor test scores.
  • Similarly, sumo wrestlers in Japan are incentivized through bribes and social incentives to cheat and throw certain important matches (to allow other wrestlers to win) so other wrestlers do not drop in the rankings.

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Which Is More Dangerous Swimming pool or gun?

Which Is More Dangerous Swimming pool or gun?

  • Parents are more afraid of gun than of swimming pool. But there is 1 child drowning per every 11,000 backyard pools (550 drownings per year from 6 million pools) compared with 1 child killed for every 1,000,000+ guns (175 child deaths per year from 200m+ guns in the US).
  • By these numbers, swimming pools are 90 to 100 times more dangerous to children than guns
  • We human are horrible at assessing risks.

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CONTROL

CONTROL

If we feel in control, we view things as safer. We prefer to drive a car than fly, even though there are far more deaths from car crashes than from plane crashes. When we’re in the driver’s seat we feel in control, but in a plan we relinquish all control to the pilot, so it feels riskier.

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PRESENT VS FUTURE

PRESENT VS FUTURE

We weight the things that could kill us now more heavily than the things that could kill us in the future. A terrorist can kill us right now, but eating too much McDonald’s won’t kill us for a few decades.

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AVAILABILITY

AVAILABILITY

We see the news stories of the horrific plane crashing into the side of a mountain or the kid playing with a gun that accidentally goes off, so these feel more likely compared to the guy who fell asleep in a car and quietly veers off the road or the child who drowns in the pool without any news coverage.

A simple equation might be: Risk = Hazard + Outrage

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How the Ku Klux Klan is similar to real estate agents?

How the Ku Klux Klan is similar to real estate agents?

  • Stetson Kennedy, a man who infiltrated the 1940s KKK and published much of their secret information, thereby erasing the informational advantage they had that made people fear them.
  • Real estate agents also have an informational advantage over their clients, and they often use this to their advantage, selling houses for less than they are worth so that they can close a deal quickly because they have less to gain from a higher sale than the sellers do.

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WHAT MAKES A PERFECT PARENT?

WHAT MAKES A PERFECT PARENT?

  • Parenting methods that entail specific actions (such as taking one’s child to museums, spanking the child, reading to the child every night, etc.) play little to no role in the child’s development, whereas there are many parental qualities (such as the parents’ level of education, their age at the time of having children, etc.) that have a demonstrable influence on a child’s development.
  • Such data suggest that genetics plays a larger role in a child’s development than parental nurture does.

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EXPERTS AREN’T ALWAYS THE GOOD GUYS

EXPERTS AREN’T ALWAYS THE GOOD GUYS

  • Chances are, we’ve all been cheated at one point or another, probably by a repairman who overcharged us or an expert who gave us bad advice. Experts have an informational advantage over the average person.
  • Experts often abuse information asymmetry between themselves and consumers, but things like the internet are working to erase this information imbalance by providing more information to everyday people.

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CURATED BY

prince_rahul

"A good idea should be like a girl's skirt; long enough to cover the subject and short enough to create interest."

CURATOR'S NOTE

Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? Freakonomics will literally redefine the way we view the modern world.

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