Freakonomics A Rogue Economist Explores the Hidden Side of Everything

What is the central theme of this book? I am tempted to answer this question but I will defer answering that later in the post. I will however talk about some aspect in the book that truly impressed me. Like the authors answer to, what caused the decline of crime-rate in the US? Or why do drug dealers still live with their parents? Or how the rules of incentives can either be going for you or against you?

First, what caused the decline of crime-rate in the US? Author's answer - The legalization of abortion in year, I-forgot-the-date. If this answer shocks you then let me tell you that make two of us. The rationale behind is that most mothers who want to abort the babies either do not have the (financial and/or mental) capacity to raise kids or who know in their heart they could not do it. These kids if left to live have bigger chance to become criminals in the future. The author presented his argument basing on the statistics but I think the biggest proof is when he presented the date of the first few states in the US who legalize abortion. It showed that the first states that legalize abortion are also the states where the crime-rates are declining in faster rate than the other states that adopted this law decades later. I am presenting this because I find it interesting. I know it's hard to verify this but that’s what the values implied according to Steve Levitt (one of the book's authors).

As a side note, I read a novel (actually just part of) by Frank Peretti called The Prophet and it showed a side of abortion that's so hideous that if you think about it there is just more damage that abortion can cause than what meets the eye or in this case, what meets the figures.

Second, why do drug dealers still live with their parents? According to “conventional knowledge” the drug dealers are making big money and they are riding the best cars and wearing the best suits. But the reality is, most of the drug dealers are still living with their parents. Why? Because like any organization the drug industry follows a system that will make those in the top of the pyramid prosper and will leave the rest in the mercy of the boss. Also, drug dealers do not know how to keep money so if they get more money they also tend to spend more. The pay is low and it’s one of the riskiest jobs on earth – the chance of being killed is high. So why do drug dealers stick in the drug industry?

#1 because of the benefit of the succession, if the drug dealer climbs up the ladder of success then he will be very wealthy.

#2 Perks. I forgot what they are but being in this industry has some perks so that keep them up.

Lastly, how the rules of incentives can either be going for you or against you? I learned so much about incentives in this book and I would like to share it. Sometimes, incentives will work for you or against you. The cardinal rule (I think) in giving incentives is that it should matter to the receiver. On other words, if you are rewarding somebody and your reward does not matter to that person then it’s better to not give it. Or if you are punishing somebody for an offense then the punishment should be heavy enough for the punishment to be appreciated. So as leaders, we need to be careful in giving incentives.

So what is the central them for this book? Answer – nothing.