Freakonomics by Stephen Dubner & Steven Levitt

 The book is presented in 6 key chapters with no unifying theme. In each chapter, the authors ask a seemingly strange question, then use detailed stories and data to uncover the unexpected and often uncomfortable truths. Freakonomics helps you make better decisions by showing you how your life is dominated by incentives, how to close information asymmetries between you and the experts that exploit you and how to really tell the difference between causation and correlation.

Freakonomics shows, economics ultimately boils down to the study of incentives. Incentives are all around us, whether natural or manufactured (like by a parent, teacher, boss, politician or economist). In this episode, we talk about 4 major areas of economics, using a few stories and studies from the book to flesh out the concepts:

Freakonomics by Stephen Dubner & Steven Levitt

– Moral incentives VS Economic incentives

– Information Asymmetry

– Correlation VS Causation

– Risk Assessment

Table of contact:

INTRODUCTION: The Hidden Side of Everything

  1. What Do Schoolteachers and Sumo Wrestlers Have
  2. How Is the Ku Klux Klan Like a Group
    of Real-Estate Agents?
  3. Why Do Drug Dealers Still Live with Their Moms?
  4. Where Have All the Criminals Gone?
  5. What Makes a Perfect Parent? 133
  6. Perfect Parenting, Part II; or: Would a

Freakonomics Summary

At its roots, economics is simply the study of incentives. It’s all about how we use our limited resources in an attempt to satisfy our unlimited wants and needs. It’s about the trade-offs we make each day. For example, we’re incentivised to go to work and trade our time (a limited resource) to get money to buy the things we want. When we’re a toddler, we’re curious to see what’s going on up there on the stove so we reach up and touch it, but when we get burned we’re incentivised not to touch it again. Our parents praising us for a good score in our 4th-grade maths test is an incentive to do some extra homework the night before the test.

If these incentives don’t occur organically, it’s up to people to create them. A trip to the toy store might be how a parent incentivises their child to eat all of their veggies, or a government agency might find a company that doesn’t pay all of their taxes correctly. People in positions of power – parents, teachers, bosses, politicians – are setting up incentives that encourage people to do more ‘good’ things and less ‘bad things.

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