Freakonomics: Final Post

After reading this book I was really fantasized at what kind of an effect a book can have on a person.  Mainly this book taught me to not take everything for face value.  Almost everything has more to it than meets the eye and it just takes time and creativity to find it.  The innovative ideas that the authors present in the book are pretty crazy because hardly anyone would be smart enough or creative enough to figure out what they did.  So what does all of this mean?  It means that what people are consistently taught isn't always true.  Another important idea that this book teaches its readers is that everything that people do is in response to an incentive, no matter how big or small.  Economics is studying how the economy works and functions.  This book, although it may seem like it has nothing to do with the economy, is all about the social science behind the economy.  Learning how people act and react in certain situations determines how the economy will be effected.  So before trying to see why the market is doing something unusual or there is a trend happening, it's almost a guarantee that something different is going on in society or the way people are reacting to something.  

Freakonomics Entry #5: Statistics and Why Kids Turn Out the Way They Are

The book Freakonomics offers some statistics that are really interesting.  With these statistics is offered an explanation of why people percieve them to be different than they are.  Let's start with a situation that a parent may face.  A mom won't let her daughter play at a girls house because she knows that the family keeps a gun in their home.  But this same mom lets her daughter play at her friends house who has a swimming pool.  Which is more dangerous?  Clearly everyones initial reaction is the gun, but in reality it's the swimming pool.  In a given year there is one drowning for every 11,000 residential pools in the US.  That translated to about 550 children under the age of 10 that drown every year.  Meanwhile, there is merely 1 child killed by a gun for every 1 million plus guns.  Since there are about 200 million guns in the US that means that about 175 children under the age of 10 die each year from gun.  The likelyhood of dying from a pool is 1:11,00 as opposed to 1:1 million.  This mothers child is far more likely to die at the friends house with the pool than the gun.  One point that the author made which is very smart is when he says that risks that you control are much less a source of outrage than risks that are out of your control.  Getting randomly killed by a gun, although extremely rare, is something that you cannot control and therefore makes you afraid of it.  There are a ton of people who are afraid of flying, but not scared of driving a car.  Even though there are about 40 times more car accidents, flying a plane is out of your control.  Another concept that he came up with that was innovative was his simple equation; Risk=hazard+outrage.  When hazard is high and outrage is low, people under react.  The opposite is also true; when hazard is low and outrage is high, they overreact.  So how can we accurately access our risk factor?  We can't because we have pre-concieved notions about everything.

Freakonomics Entry #4: Does your Name Matter?

The book Freakonomics analyzes the affect different names have on people.  Parents always want the best for their kids so giving them a 'good' name seems to be essential.  So does your name change what your life will be like?  Many peoples initial reaction would be no, but this book proves that your name will effect you when someone doesn't know you and just sees the name on a piece of paper.  Some parents believe their child won't prosper unless they have the right name.  In 1958 a man from NYC named Robert Lane decided to name his son Winner.  They lived in the projects and everyone else in the family had a typical name.  A few years later he had a 7th child.  He named the boy Loser.  So how did his kids end up?  Well Winner has a criminal record a mile long with 3 dozen arrests.  Loser on the other hand went to prep school then college at Lafayette College all on scholarship.  Loser is now in the New York Police Department as a detective (his mothers dream for him).  And his friends call him Lou now, not Loser.  This is a prime example of names having no relevance on the outcome of life.  Now let's take another example.  According to a study, two people with identical resumes were sent to the same employer.  One person had the name DeShawn Williams and the others name was Jake Williams.  Jake would be more likely to get a call back.  Why?  This is because, according to the study, black sounding names have an economic penalty.  Two people from identical backgrounds named Jake and DeShawn will most likely have the same life outcomes.  But the kind of parents who name their kid Jake typically don't live in the same neighborhood or have the same circumstances as the boy named DeShawn.  From this the employer can assume that Jake comes from a better area and is more sophisticated.  So why don't people from more depressed areas name their children with names that will make them seem from better areas?  This is because there is a penalty within the community for trying to act against their culture.  They don't want to stand out because this will cause scrutiny that is unwanted.  So in conclusion the name that you possess as a person has little to no effect on what you will make of yourself.  Where you're from and what you try to make of your life is the difference maker.

Freakonomics Entry #3: Why do Drug Dealers Live with their Moms?

This book gives insight into a gang that sells crack in Chicago.  Many of times all we hear on the news about gangs is that they are fighting for territory or somebody was killed in a drug deal.  Most people never realize how complex of an operation it truly is to run a gang and be successful.  Running a gang is like running a multi million dollar corporation.  There is millions of dollars at stake in the business.  It's a game where people risk their lives for the chance to move up in the gang.  I used to wonder why people joined gangs.  The reason is because they have to.  The gang has such a big presence around town that if you aren't running with them then you are putting yourself in danger.

So how does the gang really make its money?  Like all solid business' it starts from the ground up.  There are people who aren't even in the gang who want to get in who will pay the gang fee.  Then there are other people around town who will pay the gang for a protection fee.  This way the gang will have their back if anything goes wrong.  Everyone in the gang has monthly dues to pay.  Then comes the big money maker for the gang; the actual dealing of the crack.  The teens standing on street corners with a 1 in 4 chance of being killed in their time dealing drugs.  One of the characters in the book who was high up in the gang was making an average of $64,000 a month in his peak.  He had to pay the people above him 20% of that every month.

Now to the 'foot soldiers'.  The people who risk it all and get little to nothing in return.  Those people made merely $3.30 an hour, which is close to a third of what minimum wage is.  On average they are arrested 5.9 times and have 2.6 near fatal wounds in their life.  They are 50 times more likely to die than having the most dangerous job in the US which is a timber cutter.  Many ask why they do it.  They do it because the only way to get to the top is to start at the bottom.  They are hoping that they will be one of the lucky few who get to move up the gangs ranks and start making the big money.  Not only that, in depressed areas when you are uneducated, there aren't many options.  Freakonomics did a really good job of explaining the multi million dollar business of running a gang and also how people get involved with it.