Thursday, February 22, 2007

Book review: Freakonomics

I've finished reading Levitt and Dubner's famous best-selling book, Freakonomics, and I had a great time reading it. It was a pretty easy read too, and you can see that they've targeted it at the average layman in simple terms.

Levitt and Dubner also have a Freakonomics blog where you can sample some of their writings. They generally apply economic theory and analysis to your everyday social issues which provides a new level of insight, something quite distinct and often contrary to the conventional wisdom or common mass-media consensus.

Freakonomics, in the opening chapter, openly states that this book has no unifying theme. It does not attempt to focus on one area of public policy, nor does it try to explain economic theory and principles. It does however use the data available and statistics, coupled with some reasoning, to analyse a few colourful issues in the first 3 chapters, which are:

  • Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?
  • Chapter 2: How Is the Ku Klux Klan Like a Group of Real-Estate Agents?
  • Chapter 3: Why Do Drug Dealers Still Live with Their Moms?
These chapters are all very illustrative, balanced, but above all - fun to read. Unlike most economic textbooks, the theory is applied to scenarios where most people thought was beyond the realm of economic analysis.

In fact, the subtitle of the book is "a rogue economist explores the hidden side of everything". And this is precisely what the book does. It illustrates how economics can be applied to every issue. It also shows how analyzing an issue and proposing regulations, incentives or penalties to deal with that issue is something extremely risky and uncertain, and should not be done from a moral perspective alone.

It seems every issue has unknown quantities, a lack of information on one side by decision makers, or some unwanted side-effect once you introduce legislation that doesn't deliver what was originally intended.

e.g When US public schools in 2002 had to comply with high-stakes testing whereby the results were linked to a school or teachers budget, then there was a huge spike in teachers cheating and modifying test scores.

But above all, I appreciate Freakonomics for promoting critical and rational thought. Things are often more complex than the conventional wisdom would suggest. The media are often duped and fairly ignorant of some of the processes and mechanisms that work behind the scenes in any issue. It takes some patience and diligence to analyse something, and to be frank, most journalists and pundits do not have the time or patience to really critically evaluate whats going on in the world.

They do have the time to publish headlines, produce news-reels and sound-bytes for the daily news. But critical thought is obviously where you don't swallow someone else's analysis, and you filter out the facts and data to develop your own analysis. This book may introduce new doubts about a particular belief or value held by the mainstream that is demonstrably false, and hopefully this blog will continue to build upon those foundations.