Steven Levitt and Stephen Dubner stirred controversy when they published the book Freakonomics: A rogue economist explores the hidden side of everything. This book takes a very unconventional view on matters of economics. The topics discussed in the book touch on issues that most people would prefer not to discuss; for instance, issues comprising of corruption and abortion. Critics accuse the authors of losing sight on the main topic, which is economics, and describe the book as more of a sociological book than a book on economics.
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They also bring to question the criteria used in collection of data used in the formulation of ideas contained in the book to support the authors’ opinions. This paper looks at the controversies that develop from the book in view of real life experiences and how the book addresses the issue of macroeconomics.
The authors share the conventional notion on economics, which touches on distribution of goods and services coupled with the creation of wealth. Different other books on economics share this sentiment. One such book is The road to Serfdom written by Fredrich A. Von Hayek.
However, Levitt and Dubner go rogue from the very beginning and choose to define economics as the study of incentives. On reading the book, one would infer the word ‘incentives’ to mean bribes as that is the context in which it appears in the book. This may be a misleading approach, especially to someone new to the study of economics. Economics has elements of incentives in it, but not in the form described by Dubner and Levitt.
However, just as it is in philosophy, one needs to look at the book without any prejudicial view in order to understand the authors’ perspectives. For instance, although economics is not the study of perspectives as suggested by the authors and, even though their definition of the word incentive is not as it is usually applicable, the version of the word ‘incentives’ as described in the book (bribery) does exist in real life.
Corruption indeed exists in every aspect of societal interactions without the exception of the economics field. In chapter one of the book, the authors give the example of teachers and students. In their opinion, when teachers give students multiple-choice questions in high-stake tests, it amounts to cheating.
They add that this act amounts to giving incentives. The authors give the same example as applying to Sumo wrestlers. They argue that the perception of cheating or bribery in a match seems to affect the outcome of a match, whether the bribing indeed occurs or not. The former example can be easy to relate to in real life. For instance, a teacher who earns a small income would be more likely to jump on the opportunity of a promotion and would do anything within his or her power to ensure that he or she does not lose that prospect.
Such a teacher is more likely to be motivated into doing positive acts such as holding remedial classes for his or her poor students and negative acts such as giving exams that hint on the answers of the tests. In extreme cases, the teacher would go as far as giving sheets that include of some of the answers to the test in order to ensure that the students maintain a certain level in their scores.
Chapter four of the book touches on the role of legalising abortion in reducing crimes. Although these two ideas seem irrelevant to each other, the overall idea makes sense if looked at objectively. If looked at with a moral prejudice, which underscores the perspective that most critics seem to view the book from, the idea behind the concept and the resulting conclusion is lost.
The authors explain the idea in detail in chapter five. Their view is that children born after a ban of abortion are more likely to lead worse lives as compared to those born when abortion is permitted under law.
The example given is that of an abortion ban that took place in Romania around 1967. The authors are of the view that children born a year after the ban would perform poorly in school, fail in employment sector, and would thus be likely to be criminals. Although economists and other scholars criticise this premise for the method that was used in collecting the statistical data upon which the conclusion had its basis, the sense in this concept is logical.
The ban of abortion would have the effect of increasing the rate at which children are born as well as the number of children born every year, which has ripple effects in the macro economy. One such effect is the increase of unemployment specifically for this generation of individuals. The high numbers of children born would increase the number of children in schools. In turn, this move would affect the quality of education available to every child negatively.
Poor education has the adverse effect of reducing the skill set of an individual, limiting the chances that such an individual would get a good job. The result of this scenario is that the labour market gets flooded with people who have no discernible skills to offer.
Businesses thus recruit fewer employees as they have to use company resources to offer special training programs so that they add value to the business. The individuals who are not lucky enough to get such opportunities, which are the majority of the group, end up depending on crime and other unorthodox means in order to earn income.
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Therefore, practically speaking, the theory proposed by Levitt and Dubner makes sense especially in relation to macroeconomics. Macroeconomics is a concept of economics that focuses on the entire workings of the economy of a large region such as a country or several countries.
It deals with the performance of a large region with regard to productivity, the structures put in place to control the economy, the behavioural aspects of people, and the way such aspects affect the economy among other aspects. Unlike micro economy, which focuses on a specific aspect or market, macro economy focuses on the entirety of a market system.
Factors that affect macroeconomics include, but are not limited to, unemployment as illustrated by Dubner and Levitt, inflation, and deflation, which entails the raising and falling of market prices respectively, and monetary policies that are set by governments in order to optimise the performance of their respective economies.
Although the book has its shortcomings, such as the methods used in the collection of statistics and the moral implications, an objective look into it is very informative as it highlights issues that most scholars avoid while providing practical examples.