In Chapter 2 of Freakonomics, authors Steven D. Levitt and Stephen J. Dubner explore the concept of incentives and how they can influence behavior. The chapter begins with a discussion of a daycare center in Israel that implemented a fine for parents who were late in picking up their children. Initially, the fine seemed to work as intended, with late pick-ups decreasing significantly. However, after a few months, the number of late pick-ups began to rise again.
Upon further investigation, the authors discovered that the fine had actually had an unintended consequence: parents who were consistently on time began to view their punctuality as less important, since they could simply pay the fine if they were late. The fine had actually created a disincentive for punctuality.
This example illustrates the complexity of incentives and how they can have unexpected consequences. The authors go on to discuss other examples of how incentives can shape behavior, including a study on real estate agents in which agents who were paid a higher commission per sale actually sold fewer houses than those who were paid a lower commission but received a salary.
The chapter also delves into the concept of "moral hazard," in which individuals take more risks because they are protected from the consequences. For example, executives at companies with large amounts of debt may be more likely to make risky business decisions because they know they will not personally suffer the consequences if the company goes bankrupt.
Overall, Chapter 2 of Freakonomics illustrates the power of incentives and how they can shape behavior in unexpected ways. It emphasizes the importance of considering the potential unintended consequences of any incentive system and the need to carefully design incentives to achieve the desired outcome.
Freakonomic Chapter Summary
Instead, someone had to invent them with some goal in mind. People cheat in order to get more for less. In simple terms, some risks are more frightening than others. The chapter then turns to the United States in the mid-1990s: while crime had been rapidly rising in the year prior, the trend suddenly reversed, leaving many experts puzzled and attempting to explain it. Chapter 2 Summary In Chapter 2, the authors discuss the economic term known as "information asymmetry. Strangely, Loser Lane went on to be a pretty successful man: he went to prep school on a scholarship, and eventually became a detective sergeant for the NYPD.
Freakonomics by Steven D. Levitt and Stephen J. Dubner Analysis and Summary
On a national scale, crack cocaine contributed to a rise of a nationwide crime wave at America In 1939, Dupont introduced nylon stockings for women. Indeed, studies have found that a disproportionate number of people on dating websites claim to earn more than 200,000 dollars per year—suggesting that a significant portion of online daters lie or exaggerate their incomes. So unfortunately, most conventional wisdoms are convenient and comforting, but wrong. In the 50s and 60s, however, the Klansmen experienced another revival in Atlanta. Despite this danger, though, dealers still took the job in the hopes that they could move up in the ranks and make it big, especially since these were often people who grew up below the poverty line and did not have many prospects for other careers. And again, this is because of incentives compared to earlier times.
Duncan was able to 1 identify that cheating was, indeed, occurring in Chicago classrooms, and 2 use his influence, and the influence of his study, to reduce cheating the next year. . Dubner The author Steven Levitt studied economics at Harvard University and MIT. Analysis While Chapter 1 focused primarily on the enormous role that incentives play in economic decision-making, Chapter 2 narrows in specifically on a phenomenon known as information asymmetry. What mostly instilled fear among people was the fact that Klan members included sheriffs, deputies, and police officers. Under the No Child Left Behind policy in American education, schoolchildren who get low scores on the standardized tests get held back a year. Information asymmetry is one of those phenomena that distance idealized economic models from the way economics works in the real world.
Describe how this incentive structure could end up encouraging bad or unethical behavior. I am going to assess the 6 chapters and give an overall summary and my evaluations of the novel. Although many people abuse their access to information, some of these people are worse than others. The duo validates their argument by pointing at how the candid laws that initially permitted abortion and those that later followed that prohibited it impacted crime rates in the US either negatively or positively. The authors attribute this occurrence to the advent of the Internet, paving way for websites such as Quotesmith. The Klansman used terrorist methods—arson, intimidation, murder, etc. While a lot of people spoke against the Klan, they knew very little about Chapter 3 Chapter 3 of Freakonomics examines the economy of crime, specifically incentives facing American street gangs, dealing in crack cocaine.
Freakonomics Book Summary by Steven D. Levitt and Stephen J. Dubner
Each topic is individually analyzed and there is no clear flow, albeit for the last two chapters that complement each other. With the detailed perspective on incentives that this book provides, readers can view the choices and actions of the people with whom they interact more critically in order to determine which incentives are motivating them. Dramatic effects sometimes have distant and subtle causes. Levitt Freakonomics Click to Tweet Chapter 4 Chapter 4 of Freakonomics discusses various theories proposed in hindsight and levered finds that some had met it, but most did not. All chapters are written in an accessible and comprehensive way so that non-technical readers can also easily grasp the data analysis methods. Apparently, parents balanced a small fine against their own inconvenience in being on time and decided that the cost was worth it. GradeSaver, 27 July 2016 Web.
On the other hand, the people at lower ranks get very little compensation, just as the dealers who risk their lives and end up getting very little payment Holt, 2005. This is the way most businesses in corporate America are structured, from One of the primary ideals that drive American capitalism is the belief in a meritocracy, or the idea that hard work will allow anyone to rise and be successful. Because of incentives, people are sometimes driven to cheat. Sure enough, cheating fell 30 percent the next year. It discussed tougher gun controls may have caused it since they were limiting who could buy guns and how you could get them that few people had guns to shoot others with. Kennedy contacts the producers of the then-popular radio show Adventures of Superman and. Winner Lane, on the other hand, became a career criminal and has spent most of his adult life behind bars.
This, all over the United States, began to raise many question on why the crime rates had dropped so suddenly in a short amount of time. The daycare fine inspired parents who had previously conceived of their tardiness in moral terms to conceive of their tardiness in strictly economic terms—a change that, counterintuitively, resulted in more tardiness. However, Levitt and Dubner state that the advent of the Internet has significantly altered the way experts abuse information. Buy Study Guide Summary The next chapter aims to answer the question, "How is the Ku Klux Klan like a group of real estate agents? Levitt attributes Kennedy's success to his understanding of the power of information. If these children were to be born, they would have faced harsh living conditions leading them into crime during teenagehood. He brought in large volumes of cocaine and distributed it to predominantly black street gangs to turn into crack cocaine and sell on the streets. We will likely describe ourselves in a very different way during a job interview than we would during a first date.
The discussion of American crime continues in the fourth chapter, which is about the remarkable decline in crime in the 1990s. . Fryer has studied the segregation of black and white culture: black and white people watch different TV, smoke different cigarettes, buy different brands, etc. Among these cheaters are school teachers, sumo wrestlers, and office workers. Conversely, schools that do well on the tests get more funding while teachers whose students get good scores can get promoted or receive cash bonuses. Kennedy realized the best way to take the Klan down was to expose their secret information to the world in whatever way he could, so he fed these important Klan secrets to a radio show listened to which many children listened, called "Adventures of Superman.