Freakonomics

A Rogue Economist Explores the Hidden Sides of Everything
by Steven D. Levitt & Stephen J. Dubner

How many books change how you perceive the world? I'm sure there are many around -- for me, this happens to be one of them. The authors challenge some of our "conventional knowledge", things that we have "always known to be true"... and reveals how some of our everyday assumptions are simply wrong, and our human natures can be taken advantage of.

It also reminds us to take statistics and economists with a pinch of salt, that we need to think through the issues before accepting what they seem to show. There is a whole big difference between correlation and causality. For example, he points out that surveys have shown that in America, if you're a "black", changing your name from a "traditionally black name" like DeShawn to a more "white name" like Jake would grant you better chances at job interviews. Sounds like racism? It jolly well might be. But if you stop and think, these people who take the initiative to change their names are probably more motivated and well-informed than other "blacks". Perhaps that is the reason why these people get more job interviews?

Excerpts:

(1) Cheating -- teachers and sumo wrestlers
Economics is, at root, the study of incentives: how people get what they want, or need, especially when other people want or need the same thing. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical ecomomist believes the world has not yet invented a problem that he cannot fix if given a free hand to design proper incentive scheme.

(2) Information control -- the Ku Klux Klan and real-estate agents
It would be naive to suppose that people abuse information only when they are acting as experts or agents of commerce. Agents and experts are people too -- which suggests that we are likely to abuse information in our personal lives as well, whether by withholding true information or editing the information we choose to put forth.

(3) Economics -- drug dealing and the capitalist system
The rules of the tournament are straightforward. You must start at the bottom to have a shot at the top. You must be wiling to work long and hard at substandard wages. In order to advance in the tournament, you must prove yourself not merely above average, but spectacular. And finally once you come to the sad realisation that you will never make it to the top, you quit the tournament.

(4) Real Factors -- how legalized abortion reduced crime.
When the crime rate began falling in the early 1990s, it did so with such speed and suddenness that it surprised everyone. It took some experts many years to even recognise that crime was falling, so confident had they been of its continuing rise... Now the experts hustled to explain their faulty forecasting... After the relief had settled in, after people remembered how to go about their lives without the pressing fear of crime, there arose a natural question: just where did those criminals go?

(5) Parenting -- what matters: who they are or what they do?
Consider again the eight ECLS factors that are correlated with school test results:

• The child has highly educated parents
• The child's parents have high socioeconomic status
• The child's mother was thirty or older at the time of her first child's birth
• The child has low birthweight
• The child's parents speak English at home
• The child is not adopted
• The child's parents are involved in PTA
• The child has many books in his home

And the eight factoss that are not:

• The child's family is intact
• The child's parents recently moved into a better neighbourhood
• The child's mother didn't work between birth and kindergarten
• The child attended Head Start
• The child's parents regularly take him to museums
• The child is regularly spanked
• The child frequently watches television
• The child's parents read to him nearly every day.
  

(6) Naming -- socioeconomic patterns of names
The data show that, on average, a person with a distinctively black name -- whether it is a woman named Imani or a man named DeShawn -- does have a worse life outcome than a woman named Molly or a man named Jake. But it isn't the fault of their names. If two black boys, jake Williams and DeShawn Williams, are born in the same neighbourhood and into the same familial and economic circumstances, they would likely have similar life outcomes. But hte kind of parents whoname hteir son Jake don't tend to live in the same neighbourhoods or share similar economic circumstances with the kind of parents who name their son DeShawn... His name is an indicator -- not a cause -- of his outcome.

Summary available in Wikipedia:
http://en.wikipedia.org/wiki/Freakonomics