Freakonomics

Freakonomics discusses one of the most important inventions that leveled the marketplace for consumers: the Internet. As the market is largely driven by an uneven distribution of knowledge, when consumers are informed about choices, about competing products, about how an industry works, about profit margins, the power dynamic shifts.

“Information is a beacon, a cudgel, an olive branch, a deterrent, depending on who wields it and how. Information is so powerful that the assumption of information, even if the information does not actually exist, can have a sobering effect…Information is the currency of the Internet. As a medium, the Internet is brilliantly efficient at shifting information from the hands of those who have it into the hands of those who do not…Just as Stetson Kennedy accomplished what no journalist, do-gooder, or prosecutor could: it has vastly shrunk the gap between the experts and the public.”

The Internet has proven particularly fruitful for situations in which face-to-face encounter with an expert might actuarly exacerbate the problem of asymmetrical information–situations in which an expert uses his informational advantage to make us feel stupid or rushed or cheap or ignoble…

Experts depend on the fact that you don’t have the information they do. Or that you are so befuddled by the complexity of their operation that you wouldn’t know what to do with the information if you had it. Or that you are so in awe of their expertise that you wouldn’t dare challenge them…

Armed with information, experts can exert a gigantic, if unspoken, leverage: fear. Fear that your children will find you dead on the bathroom floor of a heart attack if you do not have angioplasty surgery. Fear that a cheap casket will expose your grandmother to a terrible underground fate. Feat that a $25,000 car will crumple like a a toy in an accident, whereas a $50,000 car will wrap your loved ones in a cocoon of impregnable steel. The fear created by commercial experts may not quite rival the fear created by terrorists like the Ku Klux Klan, but hte principle is the same.”

Here’s some more information that Freakonomics provides:

Real-estate agents–When real estate agents sell their own homes, they keep their house on the market longer and get better offers, selling it for more than 3% more than they get for their clients. Consider that when an agent is selling a client’s house she’ll get an average of $150 extra for every additional $10,000 on the sales price. Since the difference in sales price has little impact on the agent’s commission, she has more incentive to encourage you to sell as soon as possible.



What’s more is that the terms used in the sales ad influence the sales price. Beware terms like “fantastic,” “spacious,” “charming,” or “great neighborhood.” Or even an exclamation mark! Those five words correlated with a lower sales price. The ads for the agents own homes omitted those words or other vague adjectives, instead including descriptive words like “granite” and “move-in condition.”

Discrimination–In the show, “The Weakest Link” the contestants who suffered the greatest discrimination and were the quickest to be eliminated were Hispanics and the elderly, disproportionately to their skills.

The authors of Freakonomics answer more interesting questions about our society:

Crime–What caused a precipitous drop in crime in the nineties? Was it the efforts of law enforcement, stiffer crime laws, efforts at reducing drug crimes? Actually, it was none of those!

Parenting–How much does your parenting matter? Does it matter how much television your children watch? Whether mom stays home until kindergarten? Whether the child attended Head Start? Whether the children are read to or taken to museums? You will be surprised by what actually matters and what doesn’t and how little the actual truth matches the folk wisdom.

Names–Does the name you give your child correlate with how well he’ll do in life and whether he will succeed? I’m sure you’ve heard of Baby Naming Consultants. Are they worth the money?

I’ll leave the rest of the book a mystery for you to discover.

This entry was posted on May 18, 2008 at 8:50 pm and is filed under Books, Brain Candy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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