At times, human beings behave rationally. They pursue their own best interests, protecting their health, their financial security, and their safety. However, there are many times when human beings act irrationally, harming their own interests. In Freakonomics, Dubner and Levitt show how extensively irrational thinking governs our lives, and how economic knowledge can sometimes correct irrational thinking at its worst.
Dubner and Levitt detail two main forms of irrational behavior. First, Freakonomics shows how people allow fear to influence their behavior. At times, fear can be a highly rational behavior: after all, people are generally frightened of things that threaten their lives and oppose their own self-interest. However, humans aren’t very good at estimating relative danger. For example, people tend to worry about dying in plane crashes far more than they worry about dying in car crashes, even though car crashes are far more common and equally lethal. Second, Freakonomics shows that people irrationally allow other people, especially groups of people, to influence their behavior. If a group of people behaves a certain way or believes in certain ideas, other people will tend to imitate the group’s behavior and beliefs. In this way, misinformation can become so widespread that it becomes difficult to see the truth. John Kenneth Galbraith, the famous 20th century economist, referred to group misinformation as “conventional wisdom.” Galbraith argued that the only way to see the truth about life was to ignore conventional wisdom and use economics. Freakonomics is dedicated to fighting the conventional wisdom, just as Galbraith wanted.
Largely as a result of fear and conventional wisdom, people have a tendency to place a lot of trust in so-called experts. In simplest terms, an expert is anyone who claims special access to information—real estate agents, science professors, and consultants are all different kinds of experts (with information about houses, science, and business, respectively). One common problem with experts, however, is that they can abuse their authority, manipulating the public’s irrational fear and trust for conventional wisdom, furthering their own interests in the process. In part, Freakonomics is designed to encourage readers to question experts’ authority and explore information on their own, using tools like the Internet and economic analysis that eliminate the need for an intellectual “middleman.” In doing so, people can minimize the role of fear and conventional wisdom in their decision-making, and perhaps learn to make better decisions overall. (Dubner and Levitt, perhaps because they’re writing in 2005, when the Internet was very different from what it is now, don’t address the possibility that the Internet will also trigger the emergence of even more pundits, gurus, and other middlemen “experts” online—a possibility that seems to have come true in the decade since Freakonomics was published.)
It’s important to recognize that not all forms of irrationality are necessarily bad. For instance, a family that chooses to feed a starving child would not, at least economically speaking, be behaving “rationally,” but it would be hard to argue that feeding the child isn’t the right thing to do. Nevertheless, Freakonomics suggests that, for the most part, irrational behavior is harmful, both to oneself and to other people. Furthermore, Levitt and Dubner criticize the irrational behaviors that stem from experts abusing information (e.g., real estate agents lying to their clients), rather than the irrational behavior that stems from strong moral convictions (e.g., feeding the hungry child). To the extent that Freakonomics supports any course of action, it encourages people to use research and open-mindedness when making decisions, rather than blindly submitting to the authority of conventional wisdom, or to experts to know how to manipulate conventional wisdom.
Irrational Behavior, Experts, and “Conventional Wisdom” ThemeTracker
Irrational Behavior, Experts, and “Conventional Wisdom” 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.
Consider the folktale of the czar who learned that the most disease-ridden province in his empire was also the province with the most doctors. His solution? He promptly ordered all the doctors shot dead.
It is common for one party to a transaction to have better information than another party. In the parlance of economists, such a case is known as an information asymmetry. We accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer). But information asymmetries everywhere have in fact been gravely wounded by the Internet.
Armed with information, experts can exert a gigantic, if unspoken, leverage: fear.
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 the conventional wisdom in Galbraith's view must be simple, convenient, comfortable, and comforting--though not necessarily true. It would be silly to argue that the conventional wisdom is never true. But noticing where the conventional wisdom may be false—noticing, perhaps, the contrails of sloppy or self-interested thinking—is a nice place to start asking questions.
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).
The mayor of a city sees that his citizens celebrate wildly when their team wins the World Series. He is intrigued by this correlation but, like the "Moratorium" author, fails to see the direction in which the correlation runs. So the following year, the mayor decrees that his citizens start celebrating the World Series before the first pitch is ever thrown—an act that, in his confused mind, will ensure a victory.
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.
The typical parenting expert, like experts in other fields, is prone to sound exceedingly sure of himself. An expert doesn't so much argue the various sides of an issue as plant his flag firmly on one side. That's because an expert whose argument reeks of restraint or nuance often doesn't get much attention.
Until the early l970s, there was a great overlap between black and white names. The typical baby girl born in a black neighborhood in 1970 was given a name that was twice as common among blacks as whites. By 1980 she received a name that was twenty times more common among blacks.
If DeShawn Williams and Jake Williams sent identical resumes to the same employer, Jake Williams would be more likely to get a callback. The implication is that black-sounding names carry an economic penalty. Such studies are tantalizing but severely limited, for they can’t explain why DeShawn didn’t get the call. Was he rejected because the employer is a racist and is convinced that DeShawn Williams is black? Or did he reject him because "DeShawn" sounds like someone from a low-income, low-education family?
Some of these ideas might make you uncomfortable, even unpopular. To claim that legalized abortion resulted in a massive drop in crime will inevitably lead to explosive moral reactions. But the fact of the matter is that Freakonomics-style thinking simply doesn’t traffic in morality. As we suggested near the beginning of this book, if morality represents an ideal world, then economics represents the actual world.
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.