Capitalist Concept

My Reaction to Freakonomics (The Movie)

I recently saw Freakonomics the documentary. I heard great things about the best selling book and have been meaning to read it for a while. In fact, the book was the subject of one of my presentations in 7th grade; but I only read Sparknotes to complete it. Finally, after seeing the movie, I can speak about the book more knowledgeably. Alright, enough personal information, let’s jump into the key takeaways Steven Levitt and Stephen Dunbar formulated.

Firstly, statistics can be mathematically correct, but their interpretations are still subjective. As my Biology teacher says, “Correlation doesn’t mean causation”. This topic is commonly explained in lower level economics and political science classes. The premise of research in these subjects is to differentiate the two and find true causation. A good example illustrated in the movie examined the causes of the decreased crime rates in the 1990s. A prominent newspaper claimed the causes could have been politicians (e.g. Rudy Giuliani, Bill Clinton,…), increasingly effective policing tactics, and better family values. However, Levitt pointed to abortion being the main cause of decreased crime. By eliminating unwanted pregnancies, children who weren’t wanted didn’t grow older.

Similarly, this principle also hold true when valuing a company. As many practicing accountants will tell you, the dollar value of a company is a subjective number. That is why companies hire investment bankers to come up with a valuation range and negotiate for the best price.

Secondly, incentives matter. By studying human incentives, we can create games in which to manipulate them in beneficial ways. For example, Steven used his daughter’s potty training as an example. A piece of candy used to reward her for correctly using the toilet. This method was very effect for the first week. However, the problem with incentives is that people exploit them in two ways: through free riding and adapting to the game. The Levitt’s daughter got so good at using the toilet that she could control her pee to maximize the amount of candy she received. Nevertheless, the lesson still holds true. Mapping successful game processes out can allow researchers to find incentives that do work and apply them to other games. This process is commonly known as gamification.

Another way the game developer can understand the process more intricately is to get involved when conducting research- “put yourself in the subjects shoes”. This is the third point I took away from the film. Researchers can define incentives in more details if they experience or “think like” the subject.

There were a few other cases I thought were worth noting. SPOILERS: For example, how a person’s name dictates their success (it doesn’t), whether or not to trust your real estate agent’s offer (keep your house on the market longer), and corruption in the world of sumo (the competition process matters). Even with all of the terrible acting, the movie was thought provoking. Personally, I found the information on research methods useful in picking my next paper topic. Moreover, I enjoyed the authors’ insight into several gamificaiton cases.

In the future, I plan on reading Super Freakonomics and checking out the NY Times Freakonomics Blog. Maybe they will come out with another movie and save me the trouble.

Just kidding. I’ve changed.