As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular
Some of the most compelling incentives yet invented have been put in place to deter crime. Considering this fact, it might be worthwhile to take a familiar question—why is there so much crime in modern society?—and stand it on its head: why isn’t there a lot more crime? After all, every one of us regularly passes up opportunities to maim, steal, and defraud. The chance of going to jail—thereby losing your job, your house, and your freedom, all of which are essentially economic penalties—is certainly a strong incentive. But when it comes to crime, people also respond to moral incentives (they don’t want to do something they consider wrong) and social incentives (they don’t want to be seen by others as doing something wrong). For certain types of misbehavior, social incentives are terribly powerful. In an echo of Hester Prynne’s scarlet letter, many American cities now fight prostitution with a “shaming” offensive, posting pictures of convicted johns (and prostitutes) on websites or on local-access television. Which is a more horrifying deterrent: a $500 fine for soliciting a prostitute or the thought of your friends and family ogling you on www.HookersAndJohns.com.
(с)Q:Some cheating leaves barely a shadow of evidence. In other cases, the evidence is massive.Consider what happened one spring evening at midnight in 1987: seven million American childrensuddenly disappeared. The worst kidnapping wave in history? Hardly. It was the night of April 15,and the Internal Revenue Service had just changed a rule. Instead of merely listing each dependentchild, tax filers were now required to provide a Social Security number for each child. Suddenly,seven million children—children who had existed only as phantom exemptions on the previousyear’s 1040 forms—vanished, representing about one in ten of all dependent children in the UnitedStates(c)Q:Of all the ideas that Kennedy had thought up—and would think up in the future—to fight bigotry, his Superman campaign was easily the cleverest and probably the most productive. It had the precise effect he hoped: turning the Klan’s secrecy against itself, converting precious knowledgeinto ammunition for mockery. Instead of roping in millions of members as it had just a generationearlier, the Klan lost momentum and began to founder. Although the Klan would never quite die,especially down South—David Duke, a smooth-talking Klan leader from Louisiana, mountedlegitimate bids for the U.S. Senate and other offices—it was also never quite the same. In The Fiery Cross: The Ku Klux Klan in America, the historian Wyn Craig Wade calls Stetson Kennedy “the single most important factor in preventing a postwar revival of the Ku Klux Klan in the North.”This did not happen because Kennedy was courageous or resolute or unflappable, even though he was all of these. It happened because Kennedy understood the raw power of information. The Ku Klux Klan was a group whose power—much like that of politicians or real-estate agents or stockbrokers—was derived in large part from the fact that it hoarded information. Once that information falls into the wrong hands (or, depending on your point of view, the right hands), much of the group’s advantage disappears.(с)Q:Information is so powerful that the assumption of information, even if the information does not actually exist, can have a sobering effect.(c)Q:It is common for one party to a transaction to have better information than another party. Inthe parlance of economists, such a case is known as an information asymmetry. We accept as averity of capitalism that someone (usually an expert) knows more than someone else (usually aconsumer). (c)Q:If you were to assume that many experts use their information to your detriment, you’d beright. Experts depend on the fact that you don’t have the information they do. Or that you are sobefuddled by the complexity of their operation that you wouldn’t know what to do with theinformation if you had it. Or that you are so in awe of their expertise that you wouldn’t darechallenge them. If your doctor suggests that you have angioplasty—even though some currentresearch suggests that angioplasty often does little to prevent heart attacks—you aren’t likely tothink that the doctor is using his informational advantage to make a few thousand dollars forhimself or his buddy. But as David Hillis, an interventional cardiologist at the University of TexasSouthwestern Medical Center in Dallas, explained to the New York Times, a doctor may have thesame economic incentives as a car salesman or a funeral director or a mutual fund manager: “Ifyou’re an invasive cardiologist and Joe Smith, the local internist, is sending you patients, and if youtell them they don’t need the procedure, pretty soon Joe Smith doesn’t send patients anymore.”(c)Q:Consider this true story, related by John Donohue, a law professor who in 2001 was teaching at Stanford University: “I was just about to buy a house on the Stanford campus,” he recalls, “and the seller’s agent kept telling me what a good deal I was getting because the market was about to zoom. As soon as I signed the purchase contract, he asked me if I would need an agent to sell my previous Stanford house. I told him that I would probably try to sell without an agent, and he replied, ‘John, that might work under normal conditions, but with the market tanking now, you really need the help of a broker.’”Within five minutes, a zooming market had tanked. Such are the marvels that can be conjured by an agent in search of the next deal.(c)Q:They were also a lot richer, taller, skinnier, and better-looking than average. That, at least, is what they wrote about themselves. More than 4 percent of the online daters claimed to earn more than $200,000 a year, whereas fewer than 1 percent of typical Internet users actually earn that much, suggesting that three of the four big earners were exaggerating. Male and female users typically reported that they are about an inch taller than the national average. As for weight, the men were in line with the national average, but the women typically said they weighed about twenty pounds less than the national average.Most impressively, fully 70 percent of the women claimed “above average” looks, including 24 percent claiming “very good looks.” The online men too were gorgeous: 67 percent called themselves “above average,” including 21 percent with “very good looks.” This leaves only about 30 percent of the users with “average” looks, including a paltry 1 percent with “less than average” looks—which suggests that the typical online dater is either a fabulist, a narcissist, or simply resistant to the meaning of “average.” (Or perhaps they are all just realists: as any real-estate agent knows, the typical house isn’t “charming” or “fantastic,” but unless you say it is, no one will even bother to take a look.) Twenty-eight percent of the women on the site said they were blond, a number far beyond the national average, which indicates a lot of dyeing, or lying, or both. Some users, meanwhile, were bracingly honest. Eight percent of the men—about 1 in every 12 conceded that they were married, with half of these 8 percent reporting that they were “happily married.” But the fact that they were honest doesn’t mean they were rash. Of the 258 “happily married” men in the sample, only 9 chose to post a picture of themselves. The reward of gaining a mistress was evidently outweighed by the risk of having your wife discover your personal ad. (c)Q:But if there is no unifying theme to Freakonomics, there is at least a common thread running through the everyday application of Freakonomics. It has to do with thinking sensibly about how people behave in the real world. All it requires is a novel way of looking, of discerning, of measuring. This isn’t necessarily a difficult task, nor does it require supersophisticated thinking. We have essentially tried to figure out what the typical gang member or sumo wrestler figured out on his own (although we had to do so in reverse).Will the ability to think such thoughts improve your life materially? Probably not. Perhaps you’ll put up a sturdy gate around your swimming pool or push your real-estate agent to work a little harder. But the net effect is likely to be more subtle than that. You might become more skeptical of the conventional wisdom; you may begin looking for hints as to how things aren’t quite what they seem; perhaps you will seek out some trove of data and sift through it, balancing your intelligence and your intuition to arrive at a glimmering new idea. Some of these ideas might make you uncomfortable, even unpopular. To claim that legalized abortion resulted in a massive drop in crime will inevitably lead to explosive moral reactions.(c)