Book summary: Freakonomics

Fundamental Ideas:

1. Incentives are the cornerstone of modern life.
2. The conventional wisdom is often wrong.
3. Dramatic effects often have distant, even subtle, causes.
4. Experts use their informational advantage to serve their own agendas.
5. Knowing what to measure and how to measure it makes a complicated world much less so.

Trivia: The US spends as much money on campaign finance as on chewing gum -- 1 billion dollars per annum.

Chapter 1: Incentives lead to cheating.

1. When people pay a nominal fine for picking up their kids late from a Day care center, they lose the moral incentive to be on time, and are willing to trade this for a small amount of money, so the introduction of such a fine increases the number of such incidences. The withdrawl of the fine does not lead to a corresponding reduction.
2. Statistics reveal cheating by school teachers in promoting grades of children to enhance their own image, and also among sumo wrestlers to throw a match to let the opponent hang on to privileges.
3. Paul Feldman's bagel business shows that only about 87% of people obey an honor code based payment system. Smaller communities are more honest than bigger ones, whether offices or towns.

Chapter 2: Information is power.

1. Stetson Kennedy "outed" the Ku Klux Klan's secrets on Superman radio shows, leading to its demise.
2. The internet reduces information assymmetry - eg for term life insurance quotes.
3. Real-estate agents don't look out for a client's best interest -- 6% on the difference between an average and a good price is a paltry amount.
4. Voting data from TV program "Weakest Link" show that discrimination against Hispanics ("poor players") and the elderly ("can't stand ya"), and none against women or blacks.
5. People say one thing and do another, eg, internet dating ads.
6. Conventional wisdom is cooked up by journalists, experts and such like.
   

Chapter 3: On Crack dealers.

1. A crack gang works like a standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage.
2. Any glamour profession is like a tournament -- one must start at the bottom to have a shot at the top.
3. Crack dealing and crime devastated black neighbourhoods and set the community back by a decade.

Chapter 4: On Reduction in Crime.

1. (J K Galbraith) The two key factors contributing to the formation of conventional wisdom are the ease with which an idea may be understood and the degree to which it affects our personal well-being.
2. More policemen implies less crime.
3. Legalised abortion, Roe v Wade, prevented unwanted teenage criminals from ever being born.
4. Question: Is the trade-off of higher abortion and lower crime worth it?
   

Chapter 5: On Parenting.

1. (Peter Sandman) Risk = Hazard + Outrage. When Outrage factor is low, people tend to ignore the risk. Risks that one does not control and that are unfamiliar have a high outrage factor.
2. A good school is important to a child's education. Good peers matter a lot.
3. It isn't so much a matter of what you do as a parent; it's who you are. Parents matter a great deal, but mostly in ways that have been strongly determined well before the child is born.
   

Trivia: Chance of baby drowning -- 1/10k, chance of baby being shot -- 1/1MM, which is 100X smaller.

Chapter 6: Quantifying Culture.

1. Children's names strongly reflect the socio-economic background of their parents, and the latter is correlated with their eventual achievements.