Freakonomics [Revised and Expanded]: A Rogue Economist Explores the Hidden Side of Everything

Author: Stephen J. Dubner, Steven D. Levitt

Publisher: William Morrow (2006)

Binding: Hardcover, 320 pages

The book is a collection of economic articles written by Levitt, translated into prose meant for a wide audience. Levitt, who in the book is ascribed the epithet "rogue economist", had already gained a reputation in academia for applying economic theory to diverse subjects not usually covered by "traditional" economists; he does, however, accept the standard neoclassical microeconomic model of rational utility-maximization. In Freakonomics, Levitt and Dubner argue that economics is, at root, the study of incentives. The book's topics include:

* Chapter 1: Discovering cheating as applied to teachers and sumo wrestlers (See below)
* Chapter 2: Information control as applied to the Ku Klux Klan and real-estate agents
* Chapter 3: The economics of drug dealing, including the surprisingly low earnings and abject working conditions of crack cocaine dealers
* Chapter 4: The controversial role legalized abortion has played in reducing crime. (Levitt explored this topic in an earlier paper entitled "The Impact of Legalized Abortion on Crime.")
* Chapter 5: The negligible effects of good parenting on education
* Chapter 6: The socioeconomic patterns of naming children

One striking example of the authors' creative use of economic theory involves demonstrating the existence of cheating among Sumo wrestlers. In a Sumo tournament, all wrestlers compete in 15 matches and stay in the top league if they win at least 8 of them. The Sumo community is very close-knit, and all of the wrestlers at the top levels tend to know each other well. The authors looked at the final match, and considered the case of a wrestler with seven wins, seven losses, and one fight to go, fighting against an 8-6 wrestler. Statistically, the 7-7 wrestler should have a slightly below even chance, since the 8-6 wrestler is slightly better. However, the 7-7 wrestler actually wins around 80% of the time. Levitt uses this statistic and other data gleaned from Sumo wrestling matches, along with the effect that allegations of corruption have on match results, to conclude that those who already have 8 wins collude with those who are 7-7 and let them win, since they have already secured their place in the league.

The authors attempt to demonstrate the power of data mining. Many of their results emerge from Levitt's analysis of various databases, and his creativity in asking the right questions. For example, cheating in the Chicago school system is inferred from detailed analysis of students' answers to multiple choice questions. But first Levitt asks, "What would the pattern of answers look like if the teacher cheated?" The simple answer: difficult questions at the end of a section will be more correct than easy ones at the beginning.