At the core of Freakonomics is the concept of incentives. The concept of incentives is a way of explaining why human beings do things. In general, humans behave a certain way because they either perceive that behavior as offering a reward of some kind—a positive incentive, or “carrot”—or they avoid certain behaviors because those behaviors seem to lead to a punishment—a negative incentive, or “stick.” Intuitively, we all understand how incentives work: people work harder at their jobs if they’re offered the incentive of a higher salary; people may avoid eating certain foods if the foods offer a strong negative incentive of unhealthiness. Even so, Levitt and Dubner’s model of incentives can often be somewhat counterintuitive, and paints a uniquely balanced picture of human behavior.
Levitt and Dubner list three general categories for incentives (each of which could be positive or negative, in the manner described above). First, and perhaps most obviously, there are economic incentives; material incentives, often in the form of money or property. For example, if the government passes a law fining people for walking on the grass, then the negative economic incentive of the fine will deter people from walking on the grass. There are also social incentives; incentives based on human beings’ desire to be accepted and liked by other people. People are more likely to cheat on exams and shoplift when they’re alone, because if they were with their friends, they’d face the negative social incentive of being judged and scolded. Finally, there are moral incentives, based on people’s desire to “do the right thing.” In part, the reason that more people don’t kill and steal is the positive moral incentive of being “good” and feeling good about one’s behavior. This model of morality can be challenging, though, because in many religions and moral traditions, good behavior and self-interest are mutually exclusive. Economists, on the other hand, argue that people behave morally because they’re getting some “thing” in return for their behavior: the satisfaction of having done right. Freakonomics shows how the three incentives can be used to explain almost any kind of human behavior. If there is any measurable change in human behavior—a crime wave, a decrease in abortions, a spike in movie ticket sales, etc.—this change must be the result of a change in one of the three incentives.
Freakonomics does not address the question of which one of the three incentives plays the biggest role in influencing behavior, suggesting that Levitt and Dubner take a balanced view of human nature. In many of the book’s case studies, economic incentives seem to play the most important role: humans will choose whatever option yields the greatest material benefits. However, there are also many cases in which humans will ignore economic motives in order to impress other people or follow their own consciences. So in different cases, humans will behave selfishly, morally, or socially, or some combination of these. Ultimately, Freakonomics (and economics) defines human beings according to the things they desire and fear—material, social, and moral rewards and punishments. Human nature, one could argue, is a combination of these three competing desires, no single one of which is the most powerful in every case.
There are some obvious problems with the incentive model of human behavior, many of which are discussed in the following four themes. Incentives can be a reductive, overly simplistic way of talking about human nature, and many thinkers would argue that the three categories of incentives Levitt and Dubner propose overlap to a significant degree. Furthermore, while incentives can explain how a large group of people will behave, they can’t always describe what individual human beings will do (as the authors acknowledge in the Epilogue). Incentives can be very useful for studying and interpreting human behavior, but it’s important to recognize their limitations—and thus the limitations of economics itself.
Incentives Quotes in Freakonomics
And the millions of women most likely to have an abortion in the wake of Roe v. Wade—poor, unmarried, and teenage mothers for whom illegal abortions had been too expensive or too hard to get—were often models of adversity. They were the very women whose children, if born, would have been much more likely than average to become criminals. But because of Roe v. Wade, these children weren't being born. This powerful cause would have a drastic, distant effect: years later, just as these unborn children would have entered their criminal primes, the rate of crime began to plummet.
We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight As from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your fathers insurance company.
Is it possible, then, that an 8-6 wrestler might allow a 7-7 wrestler to beat him? A sumo bout is a concentrated flurry of force and speed and leverage, often lasting only a few seconds. It wouldn’t be very hard to let yourself be tossed.
The theme of Smith’s first book, The Theory of Moral Sentiments, was the innate honesty of mankind. "How selfish soever man may be supposed," Smith wrote, "there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it."
Roughly half of the white women on the site and 80 percent of the white men declared that race didn't matter to them. But the response data tell a different story. The white men who said that race didn't matter sent 90 percent of their e-mail queries to white women. The white women who said race didn’t matter sent about 97 percent of their e-mail queries to white men.
So how did the gang work? An awful lot like most American businesses, actually, though perhaps none more so than McDonald's. In fact, if you were to hold a McDonald's organizational chart and a Black Disciples org chart side by side, you could hardly tell the difference.
So if crack dealing is the most dangerous job in America, and if the salary was only $3.30 an hour, why on earth would anyone take such a job?
Well, for the same reason that a pretty Wisconsin farm girl moves to Hollywood. For the same reason that a high-school quarterback wakes up at 5 a.m. to lift weights. They all want to succeed in an extremely competitive field in which, if you reach the top, you are paid a fortune (to say nothing of the attendant glory and power).
DuPont had pulled off the feat that every marketer dreams of: it brought class to the masses. In this regard, the invention of nylon stockings was markedly similar to the invention of crack cocaine.
So even for someone who considers a fetus to be worth only one one-hundredth of a human being, the trade-off between higher abortion and lower crime is, by an economist's reckoning, terribly inefficient.
There is a clear pattern at play: once a name catches on among high-income, highly educated parents, it starts working its way down the socioeconomic ladder. Amber and Heather started out as high-end names, as did Stephanie and Brittany.
The second child, now twenty-eight years old, is Roland G. Fryer Jr., the Harvard economist studying black underachievement.
The white child also made it to Harvard. But soon after, things went badly for him. His name is Ted Kaczynski.