Review: Freakonomics by Steven Levitt and Stephen J. Dubner (2005)

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I was first recommended this book by my SO, and I realized that I had even talked to him about things found in Freakonomics before I even read the book. There are some new things that I learned such as opening my mind up to looking at data for things that interest me more thoroughly.

Perhaps the most important theme from Freakonomics to me was the ability to look at data from a different point of view than a conventional outlook. I also liked the parts of Freakonomics attempting to justify their view of believing that conventional wisdom is often wrong – I agree with them for the most part. Furthermore, I liked the part about how incentives matter. It’s another overall grand theme about human condition as to why we do some of the things we do. Incentives play a large part in our daily lives and in the world as a whole. If we’re more incentivized to get married and have children because the government rewards those who are married with children as compared to single individuals, it doesn’t make rational sense to not get the most benefit out of the situation if you could. So especially if you want children, you’re incentivized to do so alongside incentivized to get married considering in the US, you not only get a huge tax break from personal exemptions and married filing jointly, but for every child you have, you can claim a tax credit for $1000 per year (assuming you meet the qualifications for it as there is a fade out period for those above a certain threshold). When the government became more stringent about the rules, claims for dependents dropped.

In other cases, the evidence is massive. Consider what happened one spring evening at midnight in 1987: seven million American children suddenly 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 dependent child, 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 previous year’s 1040 forms — vanished, representing about one in ten of all dependent children in the United States.

People will do things when they are incentivized to do so. When they are decentivized, such as the IRS changing the rules, many stop whatever they were doing. Until they are stopped, they are willing to keep going if they’re incentivized to do so – if it’s better to do so than not to, more than likely you’re going to do so. I’ve experienced and realized that there are moments that I’ve done things purely because I am being incentivized to do so, and I’ve seen it happen to others. Incentives are a way to give human’s drive to do things that they don’t particularly want to do.

The topics Levitt and Dubner chose to write on were interesting. It did certainly seemed all over the place with topics covering crime, abortion, sumo wrestling, and Ku Klux Klan among other things, but I think that goes to show you how vast your thinking expands by thinking more like an economist. Thinking like an economist has you seeing things on a macro and micro level. I found Freakonomics convincing to me on a level that I tried to broaden my mind into thinking more creatively using hard data to come up with a conclusion. It was relatively easy to get into for me; it took me less than a week to finish it. Overall, I enjoyed the book and would recommend it to others especially layman wanting to start somewhere in reading economics but don’t know where to start.

If you want to give it a try, here is the link to its Amazon.

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