FREAKONOMICS - INTRODUCTION SUMMARY

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  • The early 1990s crime rate in The States is increasing rapidly.
  • According to experts, things were only going to get worse in the coming years.
  • A large portion of this crime rate was due to American teens.
  • As the 1990s wore on, crime rates dropped dramatically - teenage murders dropped by more than 50 percent in 5 years, and murder rates in 2000 reached their lowest levels in 35 years.
  • Experts like economists, criminologists, and others attribute this rapid change to several factors including the booming economy, gun control laws, and new policing strategies.
  • The real cause, however, was Roe v. Wade - a 1973 Supreme Court decision that legalized abortion through the efforts of Norma McCorvey, who had three unwanted pregnancies and had to give her children up for adoption due to lack of education and finances.
  • Abortion access was made easier for poor, uneducated, unmarried, and teenage women under this law.
  • These unborn children had a higher chance of becoming criminals decades later because of the unfavorable environmental conditions they would have grown up in.
  • As Levitt concludes this extract by stating, that it is important to focus on obvious facts as opposed to conventional wisdom.
  • Next, the author talks about how people usually use real estate agents when selling their homes because agents are regarded as experts who understand the housing market and have the same goal as the house owner selling the house for a high price.
  • However, this isn't always the case since the real objective of an agent is to make the best incentive deal, which sometimes excludes the goal of selling the house for a high price since they receive a commission of 1.5 % after splitting with the buyer's agent and their agency.
  • Additionally, it has been shown that agents typically keep their houses on the market for an average of 10 days longer than their clients to make a huge profit since they get to keep both the commission and the money from the sale.
  • The author then talks about conventional wisdom in politics pinpointing that money influences election results, and a candidate who spends more on their campaign is more likely to win.
  • In contrast, data shows that the value of a candidate's vote appeal exceeds the amount spent on his or her campaign.
  • As the author points out, learning and understanding incentives are more important than looking at conventional wisdom, which is what this book aims to do.
  • Furthermore, he points out that people tend to see the world through the prism of morality (how they want things to work) while economics reveals how things work.
  • Following are a few fundamentals of economics. 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—from criminologists to real-estate agents—use their informational advantage to serve their agenda. 5. Knowing what to measure and how to measure it makes a complicated world much less so
Economics is a fascinating subject because it touches on almost every aspect of life. This makes it a very broad field, but also a very challenging one. If you want to get a good understanding of economics, then you'll need to spend some time reading about it. You can start by looking at these book summaries and recommendations.

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