CHAPTER 2 - HOW IS THE KU KLUX KLAN LIKE A GROUP OF REAL ESTATE AGENTS ?

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  • The Ku Klux Klan (KKK) was founded by six lawyers after the civil war and was initially a prank group that later evolved into a terrorist organization targeting freed slaves.
  • The KKK had died down within a decade of its creation but would come back stronger and bigger in 1920 with about eight million members whereas this time around they not only targeted blacks but also Jews, communists, immigrants, and other minorities.
  • Stetson Kennedy, a southern man who had close relatives in the KKK, sought to speak out against prejudice while also highlighting how we were at risk of becoming victims of Klan terrorism. To break this cycle of oppression and violence, he decided to infiltrate the organization by going undercover- joining them without revealing who he was and taking part in their activities until they wanted him for higher membership status. As time went on, he learned everything there was about these people.
  • One of the KKK's terrorist tactics was lynching, which, when examined showed a decrease from the 1890s with 1,100 to the 1960s with 3 had been successful in motivating Blacks to remain fearful, prevented them from voting, and maintaining segregation laws. With this decrease in lynching incidents--which is indicative of an effective incentive--it seems that the Klan has been able to achieve its goals without the need for such drastic measures.
  • Kennedy knew the best way to go after the Klan was to provide them with no safety net; no secrecy; and give them nothing but pure criticism from every direction. He would feed this secretive group's most important information and code over a popular radio show - one that many kids also listened to - about The Adventures of Superman. Once people know everything there is about the KKK, they became an easy target for insult and derision; membership immediately plummeted.
  • Kennedy's success is attributed to his understanding of the power of asymmetrical information. For the KKK to maintain control, they needed information - but once Stetson had uncovered all their secrets and exposed them to the world, there was nothing left for them to keep hidden.
  • Like Stetson Kennedy's uncovering of KKK secrets, the internet has revealed previously hidden information, thus taking away power from various sectors of the economy but it wasn't until the late 1990s when for some unexplained reason the cost of term life insurance dropped significantly while no one at the time it was likely due to how easy it became for anyone to find which company they were most suited with just a quick search online.
  • The internet has given people more access to information than ever before, but this boon is not all it seems. Many experts still find themselves exploiting their informational advantage and using it in conjunction with other incentives like fear to get people into bad deals.
  • A similar situation is noticed in the process of selling a house using a real estate agent. A real estate agent usually has a lot less to gain from an increase in the selling price of your house than you do, so she will try to convince you that a low offer is worth taking. To do this, the agent would use her informational advantage and induce fear, for instance, she might tell you that there was a nearby home that sold at half its value due to poor conditions.
  • She may also include certain phrases in listings such as "well-maintained" that signal to other agents/sophisticated buyers to make lower offers because they suggest that there are signs of wear and tear but not yet outright decay. Specific words describing aspects of each property (e.g., granite) correlate with higher prices while vague descriptors like "charming" tend to mean lower ones.
  • Easier access to information via the internet has decreased what was once a significant gap of information between real estate agents and buyers.
  • But it is not just experts who exploit information. We choose what we want people to know about us depending on the setting or scenario - like when we write our online dating profile.
  • Data from one dating website revealed substantial information asymmetry about racial preference. In their profiles, 50% of white women and 80% of white men claimed they were open to dating all races, but the men sent 90% of their messages to white women, and white women sent 97% of their messages to white men.
  • This discrepancy means many people want to sound open-minded in public but act differently when it comes down to it. This discrepancy also crops up in politics and voting, where voters try to put on an air of being more open-minded than they are when polled or at the ballot box.

 

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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