Super Freakonomics is the follow-up to the 2005 bestseller, Freakonomics by Levitt and Dubner. This review will not be a summary of all the stories inside, although they are indeed entertaining. Given that they compare Santas and prostitutes, you quickly realize this is no economics textbook. However, I think both books should be required reading for high school students anyway because they teach that economics isn’t just about supply-and-demand curves. Economics is really about how people respond to incentives.
One main lesson is that sometimes you can’t clearly see what incentives people are responding to. When you think it’s just about money, it often isn’t. People respond to the need for sex, praise, love and the desire to avoid shame, judgment, and criticism. For example, why do people give to charity? It’s not just to help others. We do it for the tax break, for recognition in a newsletter or on a plaque, to feel better about ourselves, to avoid guilt, to help guarantee a spot in the afterlife, or simply because somebody important or attractive asked us to.
Or when you think it shouldn’t be about money, it actually is. Not very many people in the U.S. consent to organ donation, even though it could directly save countless lives. Iran compensates people for kidney donations, something that is considered unethical in the U.S. Remember, most people have two kidneys, and can live with one. How many lives could letting money play into this save?
Another worthwhile lesson is to watch out for unforeseen consequences. Here’s another example. The feminist movement resulted in dumber schoolchildren. Early in the last century, teaching was one of the few jobs available to women that didn’t involve cleaning, cooking, or other menial labor. In 1940, 55% of all college-educated females workers in their early 30s were employed as teachers.
As more and more women entered the fields of law, medicine, finance, science, and so on, resulted in a “brain drain” for schoolteachers. There are many excellent teachers still today, but according to cited research the overall teacher skill level and quality of instruction has declined over time. Between 1967 and 1980, U.S. test scores fell by the equivalent of about 1.25 grade levels.
If you liked Freakonomics, you’ll probably like this book. You have to read carefully to separate what “the research says” and the authors’ theories as to the actual reasons why. Again, there weren’t any direct applications to personal finance inside, other than perhaps showing us how pimps provide more value than Realtors. Their chapter on global warming was especially controversial. It’s been out for a while, so it should be easy to find at your local library, and used copies can be found at Half.com or Amazon for about $2 + shipping.
By Jonathan Ping | Book Reviews | 6/29/11, 5:00am