The economic world is more complicated than it seems. It isn’t just about why the price of goods is set the way they are. Economics is a field that incorporates, math, science, sociology, psychology, etc. to explain why the world’s resources are managed the way they are. It is surely important for the population to understand the fiscal world and economics is a good entry point because of its effective ability to evaluate why people choose to react to certain factors. One of these factors is called an incentive. An incentive is an encourager or motivator that makes a person react to a situation. The book Freakonomics unpacks why people react to them and deeply connects situations that don’t seem like they would connect at a glance. As the economic world is explored, the evidence for why people respond to incentives is clear. Economic, social, and moral incentives are the overwhelming reason that people react to the environment to increase their societal position.
These incentives are also what usually cause honest people to cheat. For example, schoolteachers are usually some of the more moral people in society because they are supposed to teach their students how to be honest and good. This isn’t the case when it comes to high-stakes testing. These tests would measure how competent the schools and also the individuals taking the test were. The high-stakes testing came with incentives. The positive incentives that came with high-stakes testing were huge. Teachers could be promoted, praised, or given a bonus for high test scores, and of course, the school's funding could be withheld, or the teacher could be fired if their students did poorly (Dubner and Levitt 23). Schools in Chicago were having suspicion of cheating and someone took to figuring that out. The Chicago public school district made it possible to explore the possible cheating scandal that went on during high-stakes testing. Teachers would often change answers, write the test key on the board, or even obtain a copy of the test and direct the curriculum toward the test. “Analysis of the entire Chicago data reveals evidence of teacher cheating of some 200 classrooms per year” Dunbar and Levitt 30). The study didn’t just find the teachers who cheated the most. It also found teachers who were doing their job well. It could be seen by the increase in score being carried over to the next year. After a washout of the scandal, a retest was given to identify the cheaters. “The outcome of the Chicago study is further testament to the power of incentives: the following year, cheating by teachers fell more than 30 percent.” Initially, these incentives seemed to succeed honestly, but upon further investigation, the results were falsified, and the incentives were revoked.
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Sumo wrestlers and teachers are revealed to have a connection to each other. The incentive for sumo wrestlers to do good is an economic payment of money. Like the teachers, the wrestlers found a way to rig the competition for their gains. Wrestlers might be incentivized to throw a match or make a deal where they let each other win in crucial matches so that later on down the road the wrestler can let the other one win in instances where the win would secure a large bonus. The cheating ring is large and intricate. The wrestlers have close ties, so contact is always imminent. so “even the rival stables have close ties” (Dubner and Levitt 38). This communication is key. They can work out deals so that probability and odds aren’t accurate. The incentives worked in this case. Since the sport was tied to too many things that Japan valued, the incentives were hard to control. The Japanese mafia and the fact that it is their national sport both protect the cheating. This protection is binding as in the case of the teacher’s case too. In both instances, the probability of them getting caught was low. When the seal broke all came crumbling down. The whistle-blowers gave way to evidence that there was indeed cheating and the bank of test answers vs performance caught the teachers dead in their tracks.
I have been in the world of state-mandated education for a while now and nothing is more rampant than cheating. I have witnessed a specific instance where I was in a high-stakes testing situation in eighth grade. We were all taking the mandatory science exam which we all had to pass to move on to our freshman year. I was one of the more fluent kids in the subject and I was feeling good about the exam. Once I exited the exam, one of my friends, or so I thought, came to me and told me that I had missed an answer. And I asked him how he knew. He proceeded to tell me that he had cheated on me the whole exam and the one question he knew, I got wrong. His social incentive to do well was greater than the guilt that he would feel after cheating. This occurred because he didn’t feel confident enough to do it on his own. He knew there would be no consequences for him and that he would not be caught. The wager was unequally weighted in his favor; therefore, he saw no reason not to cheat.
The deception and purposeful misconceptions that conventional wisdom delivers are murky and cannot be taken as truth. Levitt and Dubner explain how the city of Atlanta cheated crime reports to land the 1996 Olympics. The crim-filled city was being taken over by a new drug- crack. To get the backing of the populace, “the media… portray[ed] crack dealing as one of the most profitable jobs in America” (Levitt and Dubner 83). In reality, the drug dealers were still lagging in an economic sense. The problem wasn’t them getting rich; it was that they were causing crime. This crime however had to keep going because, to the black community, it was their business. It is even similar to the mega-franchise McDonald’s. The gang used as an example in the book is called the Black Disciples and specifically, a leader named J.T. is followed, like a large cooperate web, the gang had branches and gang leaders reported to a board of directors. The gang also had three officers who reported to an enforcer, a treasurer, and a runner (Dubner and Levitt 89). The similarities don’t stop there, the gang paid taxes, licensing fees, and employee benefits just like cooperate America. The gang also kept track of all the transition fees and revenue summations.
This system of course produces a hierarchy much similar to the American Business world. There were incentives for both the upper management class and the foot soldiers of the gang, who barely earned any money, and this is what produced the hierarchy. The incentive was a success. As best stated by Levitt and Dubner, “They all want to succeed in an extremely competitive field in which, if you reach the top, you are paid a fortune” (94). This is why people still look for employment in super-saturated fields that don’t pay well. The foot soldier incentive to keep working was the hope of being pushed up the totem pole so that someday they could make it on the board of directors or an enforcer at least. The incentive for the guys already near the top was a jump in pay from $100,00 to $500,000. This was a big enough incentive to be put in a position where they were more likely to get arrested than anyone else. This hierarchy never went away because people always have hope to earn more and they will do almost anything to get what they want. In the American business world, The same hierarchy exists. Walmart for example employs massive amounts of people and many employees of Walmart stick with the company in hopes of moving into management positions so that they can have more benefits, control, and of course, make more money. While the CEO, CFO, and CIO of Walmart all make massive amounts of money.
Crime is one of the top topics for the economic world since it has been around for a while and existed as a sort of oddball due to its unorthodox and illegal nature. So, looking at the crime rates in 1990 is interesting for anyone because “the American crime scene in the 1990s was at its peak and violent crime had risen 80% (Levitt and Dubner 107). This spurred analysts to come up with an explanation for the sharp drop in the mid-1990s. Theories that were cited but ineffective were the fact that the economy was strong and that capital punishment was tougher. Another theory that was indeed successful was the idea that hiring more police lowers crime. Levitt and Dubner have their theory though. They believe that the legal use of abortion to end a baby’s life was the leading factor in the crime being reduced. They found that the cheapening of abortion made it a more efficient choice for females as a route of birth control; their incentive to stay a single mother was more rewarding than having the baby. This increased the demand and lowered the population growth rate. This initial thought was brought about by the fact that “growing up in a single-parent home roughly doubles a child’s propensity to commit crime. So, does having a teenage mother. Another study has shown that low maternal education is the single most powerful factor leading to criminality” (Levitt and Dubner). Given that those cases are the best candidates for abortion, they have reason to believe that it is a legitimate answer to the drop in crime. Statistically, the murder rates of states that allowed abortion before the rest of the state saw a 23% decrease in murder rates. Also, when looking at the abortion rate vs the crime rate in the 1970s and 1990s, states with low abortion rates experienced a smaller crime drop whereas states with a higher abortion rate experienced a higher crime drop such as a 30% drop compared to states with lower abortion rates (Levitt and Dunbar 128-129).
My intuition and conscience tell me that the unintended benefit of the passage of Roe v. Wade is not that popular. I do not support the argument because I do not support abortion, but that doesn’t mean the argument isn’t valid. If statistics and reasonable logic can fully support their claims then I see no reason why it can’t be possible. Now, the question we must raise is where do we draw the cut offline? Why can’t we trace the cause of the decline to events before the passage of Roe v. Wade? The decline could be instead traced back to the initial point. Of the breakdown of the traditional family. This is what caused the increase in single motherhood and the rise in teen and premarital pregnancy, which in turn would produce children more likely to commit violent crimes. I believe that the passage of Roe v. Wade is a contributor to the drop in crime. But no one will ever know the true cause because the true causes are ultimately too factorable to be solidified.
Freakonomics taught me how to think like an economist and analyze this from an outside point of view. This is especially important in the business world and is also important to success. The book especially opened my mind to the power of incentives. These blatant and sometimes blurry devices are the driving force behind people’s decision-making process. Through the outcomes of this process, economists can learn what is efficient and smart. The theme of incentives I largely seen in every possible scenario ranging from cheating schoolteachers to power-hungry foot soldiers in the Black Disciples gang. Each situation leads to an unruly connection to a different sector of the world all through the connection of a common factor that is present in every decision- incentives. Human nature can always be counted on to react the same way when it comes to something that they think they need. Incentives pull out their inner need and make them react to their environment in a repeatable pattern and this is what makes incentives a valuable tool.
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