Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

by Steven D. Levitt

“I mean, I just—I just don’t know very much about the field of economics. I’m not good at math, I don’t know a lot of econometrics, and I also don’t know how to do theory. If you ask me about whether the stock market’s going to go up or down, if you ask me whether the economy’s going to grow or shrink, if you ask me whether deflation’s good or bad, if you ask me about taxes—I mean, it would be total fakery if I said I knew anything about any of those things.”

economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions.

Economics is seen as the ideal blend of intellectual prestige (it does offer a Nobel, after all) and practical training for a high-flying finance career (unless, like Levitt, you choose to stay in academia).

The odds that your vote will actually affect the outcome of a given election are very, very, very slim.

Still, people do continue to vote, in the millions. Why? Here are three possibilities: Perhaps we are just not very bright and therefore wrongly believe that our votes will affect the outcome. Perhaps we vote in the same spirit in which we buy lottery tickets. After all, your chances of winning a lottery and of affecting an election are pretty similar. From a financial perspective, playing the lottery is a bad investment. But it’s fun and relatively cheap: for the price of a ticket, you buy the right to fantasize how you’d spend the winnings—much as you get to fantasize that your vote will have some impact on policy. Perhaps we have been socialized into the voting-as-civic-duty idea, believing that it’s a good thing for society if people vote, even if it’s not particularly good for the individual. And thus we feel guilty for not voting.

“As long as poll-voting was the only option, there was an incentive (or pressure) to go to the polls only to be seen handing in the vote. The motivation could be hope for social esteem, benefits from being perceived as a cooperator or just the avoidance of informal sanctions.

It may be that the most valuable payoff of voting is simply being seen at the polling place by your friends or co-workers.

So why do people really pay their taxes: because it is the right thing to do, or because they fear getting caught if they don’t? It sure seems to be the latter.

Economists typically separate our daily activities into three categories: market work (which produces income), home production (unpaid chores) and pure leisure.

What makes a certain activity work for one person and leisure for another?

When most people think about incentives, especially when it’s coming from an economist, they assume it’s a financial incentive. But one thing we showed over and over is that there are all different sorts of incentives—social, moral, protecting your reputation, etc. Also: positive incentives and negative ones. But even with financial incentives, there’s so much variation, in part because scale is really, really important.

it’s good to have economists involved in these questions too, because they’re good at working with large data sets in a way that many social scientists aren’t. In that regard, I think of economics as similar in some ways to engineering and physics. It tries, and occasionally succeeds, in describing an important causal chain, providing evidence along the way. I’m not saying that makes it better than the other social sciences, but it definitely makes it different.