Freakonomics is a book written by economist Steven Levitt and journalist Stephen Dubner that uses economic principles to explain and analyze a wide range of real-world phenomena. One of the central themes of the book is the role of incentives in shaping human behavior.
Incentives are any external influence that motivates or discourages a person from taking a particular action. They can be financial, such as a reward for completing a task or a penalty for failing to meet a deadline. Incentives can also be non-financial, such as recognition or praise for a job well done, or social pressure to conform to certain expectations.
Levitt and Dubner argue that incentives play a significant role in determining how people behave in various situations. For example, they discuss the incentives that real estate agents have for selling houses. Real estate agents are paid a commission based on the sale price of a house, so they have a strong incentive to get the highest price possible. However, this can create a conflict of interest if the agent is also representing the buyer, as their incentive is to get the best deal for the buyer rather than the seller.
Incentives can also be used to encourage or discourage certain behaviors. For example, Levitt and Dubner discuss how a school in Chicago implemented a program to reward students for good attendance and grades. The program resulted in significant improvements in attendance and grades, demonstrating the power of incentives to motivate behavior change.
On the other hand, incentives can also lead to unintended consequences if they are not carefully designed. For example, Levitt and Dubner discuss the case of a daycare center that implemented a fine for parents who picked up their children late. The fine was intended to encourage parents to be punctual, but it had the opposite effect: the number of late pickups actually increased after the fine was implemented. This occurred because the fine created a financial incentive for parents to be late, as they could avoid paying the fine by arriving just after the deadline.
In conclusion, incentives play a powerful role in shaping human behavior. They can be used to encourage or discourage certain actions, but it is important to consider the potential unintended consequences when designing an incentive system. Freakonomics provides a fascinating exploration of the role of incentives in the real world, and serves as a reminder of the complexity of human behavior and the importance of considering all of the factors that can influence it.
The Freakonomics Summary You've Been Looking For
In the filming of this show, a clear bias against Latinos and the eldery was showed. Each and every person has individual reasons for pursuing a career, or goal. Though, the foot soldiers do not quite have the same incentives. They are also likely to portray themselves as accepting by putting "it doesn't matter" for their racial preferences, but often instead show a discriminatory bias in the queries to which they actually respond to. Maybe you kind of wish they were dead. In all cases, experts must present an extreme view if they want to get noticed, and this is especially true for proclaimed parenting experts.
GradeSaver, 27 July 2016 Web. This would be the same lawn that his children did all the work on. Feldman has made a comfortable living by traveling to different businesses and bringing them bagels. In their book Freakonomics, New York Times journalist Stephen J. This means that he is in a unique position to take advantage of you. In that case, their incentive to get justice or to feel better might outweigh the negative consequences they would face. For starters, remember how, earlier in the chapter, we discussed the fact that incentives operate on three levels: economic, social, and moral? And when one player in the same, Freakonomics Incentives apply to any business application you can think of because people respond to incentives.
The abuse of information asymmetry is commonly associated with fear. Another example of information asymmetry is the real estate market. After the fine is introduced, the number of late pick-ups immediately goes up. Experts who have more information than buyers can use this to instill fear in consumers, who believe they may not be able to get a better deal elsewhere or that they need a certain product or service right away for whatever reason. Following the 1973 Supreme Court case, Roe v. Today the main purpose for high-stakes testing is to evaluate the schools, teachers, and students and to hold them accountable for the education being provided and learned. In this chapter, the authors discuss eight hypotheses for why crime rates went down so dramatically in the mid-90s.
I do like the economic spirit behind the story he tells, and I think you will too: In short, this is a government scheme created to discourage driving under the influence. Information asymmetry concerns interactions that take place where one party has more information than the other, such as when experts like real estate agents or car salesmen have more information about the product they are selling and the market they are selling it in than the buyer. In her book, The Death and Life of the Great American School System, Ravitch explains the value of having students being renaissance men and women rather than only focusing on core subjects that will be on standardized… An Argument on Standardized Testing One of the great quandaries associated with the standardized testing method is the weight attributed to such inaccurate scores. . A great deal of the violence in the inner cities was driven by crack-cocaine. The authors explain that this is just part of how incentives work: they can produce unintended consequences. The internet has served to balance out the possession of information, providing more to consumers than they previously had, but many experts are still able to use their informational advantage combined with other incentives like fear to rope consumers into a bad deal.
Schools with low testing scores would be punished or shut down, and schools who did well were awarded. He uses data to show this: a parent who keeps their child away from a friend's house because her parents keep a gun, but instead allows her child to spend a lot of time at another friend's house with a swimming pool, is misguided, because the child is 100 times more likely to die in a swimming accident than because of a gun. Over 25 states use the results of these tests to make decisions regarding the education system. As you can see from these examples, you have only to alter the variables as it suits your situation. The concept of incentives is a way of explaining why human beings do things. So this incentivises the agent to sell the house for a decent value, as quickly as possible instead of waiting on the highest sale value.
Freakonomics: How Incentives Are Powering Decision Making: Free Essay Example, 1807 words
Below is an excerpt summarizing the third chapter. For example, in freakonomics the authors discuss a chicago daycare in which they commonly had issues of parents arriving later than their pickup times. After examining the link between abortion and crime and seeing the effects of an unwanted child subject to neglect and abuse being born, it is clear that bad parenting matters. Instead, though, the elderly and Hispanics are discriminated against, suggesting that players are still discriminatory in some way. There are certain kinds of risks that we respond to more strongly than others, even if this response is misguided—immediate risks, for instance, seem more frightening, as do risks that we have no control over.
Finally, although temporary rewards might affect long-term motivations, no post intervention effects on donations were found, including any negative effects deriving from potential motivation loss. These lower tier members of the gang remained while the financial incentives outweighed the danger. Likewise washing hands before surgery was a simple low-cost solution — with little disincentive to adoption — that has significantly reduced post-surgery complications. We also find some evidence of a positive impact on the quality of organ transplants, measured by post-transplant survival rates. If you flunk out of law school, you have to go to work at your fathers insurance company.
Even though foot soldiers had a one in four chance of being murdered, they continued to work for J. Whilst the authors have been criticised for the veracity of some of their insights, particularly around global warming, their look-for-the-incentives approach to insight hunting yields fresh and exciting ideas. This is where the incentive that was created is doing what is not intended to do and that was for teachers to cheat for their students. Steston Kennedy demolished this fearful aura by eliminating the information imbalance between the KKK and the general public. In a capitalist society, intense competition will drive prices down. For a long time, economists thought that it was the only thing that mattered.