#2 Three Incentives Dominate Your Life The book describes three main incentives that dominate the majority of your actions and goals, and they have done so throughout your life. View All Titles. LIBRARY. Levitt and Dubner refer to this labor market as a “tournament.” A tournament, of course, refers to a situation in which many players compete against each other and, one by one, are eliminated. See all integrations. An excellent example of this is found with real estate agents. #12 Parents Should Focus on What They Do Many parents obsess over what they are as a career or a professional but what they do actually matters much more for the overall success of their children. In the epilogue, the authors make the important point that statistical analyses of “child development,” “economic success,” and other material measures are often insufficient for understanding how people really behave. #4 Social Incentives This next type of incentive is also incredibly common, although people don’t think about them nearly as clearly because of their often hidden nature. But in reality, real estate agents’ main incentive is to sell more houses, quickly—therefore, they’ll sometimes intentionally sell a house for a cheaper price to “speed things along.” There are many other examples of asymmetric information: for example, most people will fudge the details about themselves when they’re on a date or in a job interview. Following the 1973 Supreme Court case, Roe v. Wade, abortions became legal in the United States. Go here to download the Freakonomics PDF Summary. He starts with a case study on Romania. From a chapter on why the socioeconomic and racial status of parents affects how they name their children, to why parenting skills are overrated or why drug dealers have a tendency to live with their mothers, it’s a fun and interesting – and sometimes controversial – read. Want more? First, in the last 30 years it’s become increasingly common for people in the black community to give their names distinctively black names—in other words, names not likely be found outside the black community. This trend reverses the trend found in the black community before the 1980s, perhaps suggesting increased racial solidarity and black pride. The book takes a novel approach to studying economics, sharing its most interesting research. Throughout history, rich people have named their children certain names which become more popular over time. For more information, check out our privacy policy. A basic version of these incentives is your paychecks, as they involve gaining money in exchange for your time and labor. Feldman asks company employees to leave a dollar for every bagel they eat. Stay up to date with the latest marketing, sales, and service tips and news. The original text plus a side-by-side modern translation of. Irrational Behavior, Experts, and “Conventional Wisdom” Morality and Prescriptive vs. Descriptive Thinking. Summary Analysis The Ku Klux Klan … The primary causes of the declining crime rates include increased incarceration rates, a growing number of police officers, and—perhaps most important of all—the influence of abortions. #7 Experts Use Incentives to Abuse Experts, by definition, know more about a given topic or subject than the average person. In the third chapter of Freakonomics, Levitt provides an in-depth discussion that shatters the conventional wisdom that most drug dealers are wealthy. #14 Humans Are Moral While the book points out that bringing your moral compass to the table is not always a good thing, it also claims that humans are, by and large, more moral than we give them credit for. Written by Steven Levitt and Stephen Dubner, Freakonomics is the study of economics based on the principle of incentives. This makes the motivation to abuse you quite powerful and easy to bend to. The Klan is also a classic example of information asymmetry: i.e., the situation in which one person or group has more information than another person or group. The authors argue that humans usually make decisions based on the incentives for their actions. Various studies suggest that at least half of a parent’s influence on a child is genetic in nature. The authors argue that humans usually make decisions based on the incentives for their actions. In this chapter, the authors discuss eight hypotheses for why crime rates went down so dramatically in the mid-90s. Instant downloads of all 1372 LitChart PDFs The reasons for why something may occur – like the aforementioned crime rate drop – are not always clear to everyone affected by an event or trend. In the Chicago Public School system, there are annual standardized tests. This demonstrates the idea that apparently unconnected actions can have lasting effects on other spheres. #1 Put Away Morality and Ethics While morality and ethics are important for the social fabric of our culture, both of these can blind us to economic truths and help us make bad business decisions. Freakonomics: Chapter 2 Summary & Analysis Next. that have a demonstrable influence on a child’s development. The first (and longest) chapter focuses on the role of incentives in human behavior. The second child, Ted Kaczynski, grew up to be the Unabomber. It’s clear that names can prejudice people in measurable ways. These are used by anyone who tries to influence your behavior. Free and premium plans, Content management system software. Irrational Behavior, Experts, and “Conventional Wisdom” Morality and Prescriptive vs. Descriptive Thinking. In Chapter 4, called "Where Have All the Criminals Gone? In Chicago, researchers met a drug dealer named J.T., who made more than 100,000 dollars per year as the head of his “franchise” of the Black Disciples, a crack-selling gang. Free and premium plans, Customer service software. Freakonomics Summary and Analysis of Chapter 4. Such data might suggest that genetics plays a larger role in a child’s development than parental nurture does. But the first child, Roland Fryer, grew up to be a brilliant Harvard economist and, by anyone’s reckoning, a highly “successful” man. Social incentives are things like a motivation to look good in front of someone you like or to behave a particular way so you are not ostracized or isolated from your peer group. Freakonomics: Chapter 5 Summary & Analysis Next. With this story, the authors introduce the concept of a "winner takes all" labor market, as well as three other Freakonomics concepts. The example of the Black Disciples street vendors demonstrates an immutable law of economics: Whenever there are a lot of people willing and able to perform a job, that job doesn’t pay well. For more than a hundred years, the Ku Klux Klan was a powerful opponent of racial equality in the American South. The chapter also details some of the history of the crack epidemic in the United States. So I made my own sparknotes version of it. Another significant trend is that common names tend to “trickle” down from the upper classes to the working classes. Economics is the Study of Incentives. Conventional wisdom can often be wrong. From the creators of SparkNotes, something better. These directly appeal to your drive to do the right thing and your conscience.

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