Lessons from Freakonomics

#15

While you’ll find my latest book summary on the key takeaways from the book Freakonomics here, which I’ve also recommended as a good book here, let’s understand some of the other lessons mentioned in the book via simple anecdotes.

Lesson 1:

Economics is mostly about incentives, which can backfire if you don’t understand how they work

Anecdote 1:

There was a daycare that was subject to late pickups. Despite sending home notes and arguing in favour of having respect of children and their caretakers at home, there was no change. So, the daycare decided to send another note one day, saying that a financial penalty would be levied for late pickups. Instead of remedying the situation, the number of late pickups increased exponentially! This was because the guilt had been removed and the financial penalty was so low that the late pickup was now a perk accessible to most parents.

Lesson 2:

Men will lie about their height on dating websites due to information asymmetry

Anecdote 2:

Asymmetry of power refers to someone having or knowing considerably more than the another party. The ability to awe, intimidate, lie, or otherwise affect the outcome of a decision is vast. Susie’s love life moved from real life to the Internet. What was once known upfront became reported information. Though Susie checked several boxes declaring that she didn’t care about height, income, weight, or race, deep down she knew she did to some extent, just like the old times. Looks like her man too, adjusted his online response accordingly! What he lacked in reported stature, he made up for with charm and wit in person, as we would assume. Did Susie go on a second date? I guess we’ll never know.

Lesson 3:

Parenting experts are fear mongers who moonlight in product placement

Anecdote 3:

When experts rely on not knowing and use intimidation to defend their theory, some poor clueless parents fall prey to such tactics, as outlined below:

Bob and Lucy bought car seats for $200! Statistics clearly show that despite buying expensive car seats, this does not actually save more lives. 

They then purchased a 'family bed', since the salesman convinced them that they were the only parents who really cared. Unfortunately for them, they were unaware that all they had to do was advocate a parenting style that nurtured self-reliance and self-soothing. They were also oblivious to the below factors which do and do not correlate to higher test scores:

Factors correlating to higher test scores

1. Highly educated English-speaking parents with high socioeconomic status
2. Low birth weight of their child
3. Adopted child
4. Parents involved in PTA
5. Mother being 30+ at the time of their first child’s birth
6. Child surrounded by books at home

Factors not correlating with higher test scores

1. Intact family who moved to a better neighbourhood recently
2. Child watching television daily
3. Regularly spanked child
4. Mother not having gone to work between birth and kindergarten
5. Parents reading to their child often