Freakonomics
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I have been reading the book Freakonomics by Steven D. Levitt and Stephen J. Dubner recently. (Levitt is the economist on whose work the book is based, and Dubner is the "biographer" / creative partner. The book is intended to peel back the "conventional wisdom" and find out what truly incents behavior and what actually happens. As Levitt adequately puts it, (paraphrasing) if values are what we want to happen, economics measures what actually does happen. You might say our "real" values.
In the book, they tackle wide ranging issues such as gun control, abortion, cheating in sumo wrestling, drug dealer networks, the IRS, crime, given names, education, etc. It turns much of what is called "conventional wisdom" on its head. (The book cover has an apple that has been sliced to reveal that it is an orange inside :) ) For example, the conventional wisdom is that money wins elections. The real truth might be that candidates with a chance to win attract money and thus the one that was already marketable garners the most money. The two factors would appear to be cause/effect, but in fact are correlated. That's a term in the book to say that two factors go together or go apart. It doesn't determine whether the one "causes" the other.
Go read the book. It will challenge your notions.
One of the articles in the appendix of the book talks about how the American public should be clamoring for the IRS to do more audits instead of less. With such a small percentage of tax returns actually being audited, the chance of catching a cheater is reduced. Akin to a street without police, the likely chance of getting busted is small, and criminals factor this into their calculation. The data revealed that the largest portion of income that goes unreported is sole proprietor income, ie self-employed workers. That's not too hard to guess, these have an obvious absence of impediment to cheat in that they report effectively what they want. (An amusing anecdote is that when the IRS required filers to put the social security numbers of dependents rather than just names, 7 million "dependents" disappeared all at once! An astonishing number of people had been putting dogs or made-up kids on their tax return to garner exemptions for dependents.)
The profound implications of the book were thinking about incentives. That offers a fascinating glimpse into human nature, to see why we cheat, lie, steal. It has a very interesting connection to the ten commandments and personal accountability. You begin to understand your own motivations to do what you do. Another takeaway would be the idea of being in a time of information advantage. Previously, professionals and sellers of goods had an information advantage. Now, the Internet and rapid accessability of information (think price shopping on insurance rates and mortgage loans) have pushed more of that information advantage into the hands of the consumer.
It's a very profound book with a lot of wide-ranging implications.
I have been reading the book Freakonomics by Steven D. Levitt and Stephen J. Dubner recently. (Levitt is the economist on whose work the book is based, and Dubner is the "biographer" / creative partner. The book is intended to peel back the "conventional wisdom" and find out what truly incents behavior and what actually happens. As Levitt adequately puts it, (paraphrasing) if values are what we want to happen, economics measures what actually does happen. You might say our "real" values.
In the book, they tackle wide ranging issues such as gun control, abortion, cheating in sumo wrestling, drug dealer networks, the IRS, crime, given names, education, etc. It turns much of what is called "conventional wisdom" on its head. (The book cover has an apple that has been sliced to reveal that it is an orange inside :) ) For example, the conventional wisdom is that money wins elections. The real truth might be that candidates with a chance to win attract money and thus the one that was already marketable garners the most money. The two factors would appear to be cause/effect, but in fact are correlated. That's a term in the book to say that two factors go together or go apart. It doesn't determine whether the one "causes" the other.
Go read the book. It will challenge your notions.
One of the articles in the appendix of the book talks about how the American public should be clamoring for the IRS to do more audits instead of less. With such a small percentage of tax returns actually being audited, the chance of catching a cheater is reduced. Akin to a street without police, the likely chance of getting busted is small, and criminals factor this into their calculation. The data revealed that the largest portion of income that goes unreported is sole proprietor income, ie self-employed workers. That's not too hard to guess, these have an obvious absence of impediment to cheat in that they report effectively what they want. (An amusing anecdote is that when the IRS required filers to put the social security numbers of dependents rather than just names, 7 million "dependents" disappeared all at once! An astonishing number of people had been putting dogs or made-up kids on their tax return to garner exemptions for dependents.)
The profound implications of the book were thinking about incentives. That offers a fascinating glimpse into human nature, to see why we cheat, lie, steal. It has a very interesting connection to the ten commandments and personal accountability. You begin to understand your own motivations to do what you do. Another takeaway would be the idea of being in a time of information advantage. Previously, professionals and sellers of goods had an information advantage. Now, the Internet and rapid accessability of information (think price shopping on insurance rates and mortgage loans) have pushed more of that information advantage into the hands of the consumer.
It's a very profound book with a lot of wide-ranging implications.
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posted by David at 12:19 PM
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