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  • Tausif Mulla

Book Summary: Freakonomics


What if economics were less about abstract theory and more about real-world problems? What if it were about discovering Freakonomics-the hidden forces that influence everything we do? In their first book, Steven D. Levitt and Stephen J. Dubner show that economics is, in fact, just such a science. Using plain English and a wide variety of everyday examples, from cheating schoolteachers to legalized abortion, they explore the inner workings of a seemingly complex world. In doing so, they overturn some of the most cherished assumptions of conventional wisdom. Freakonomics is a groundbreaking collaboration between Levitt and Dubner, an award-winning journalist and author, and it was an instant New York Times bestseller.

About the authors

Steven D. Levitt was awarded the John Bates Clark Medal, given to the most influential American economist under forty. He is also a founder of The Greatest Good, which applies Freakonomics-style thinking to business and philanthropy. Stephen J. Dubner is an award-winning journalist, and radio and TV personality. He has worked for the New York Times and published three non-Freakonomics books. He is the host of Freakonomics Radio and Tell Me Something I Don’t Know.

Freakonomics book summary

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Chapter 1

Incentives are a very important part of life. There are three types of incentives: moral, social, and economic. Moral incentives are when you do something because it is the right thing to do. Social incentives are when people do something because they want to fit in or be liked by others. Economic incentives are when people do something in order to get something they want, such as money.

In a study of the Chicago public school system, Levitt found that a significant percentage of teachers helped their students pass the annual standardized tests. This is because the system provides incentives to schools and teachers whose students get high scores.

One of the questions I love to ask is who cheats and why? Well, his studies show that even those who seem most honorable or who seem to have the least opportunity to do so often cheat because of incentives.

Chapter 2

The Ku Klux Klan was very powerful before its secrets were revealed to the public. Once everyone found out about what they did, their power dwindled. The Klan relied on people being afraid of them, and once that fear was gone, they lost their power.

Chapter 3

This chapter is about how crime rates have changed over time, and how incentives (economic, social, and moral) play a role in this. It discusses how crack cocaine was introduced in America in the 1970s, and how it negatively impacted black Americans by setting them back 10 years in terms of progress. It also caused an increase in crime rates nationwide.

Chapter 4

The author discusses different theories about crime rates, and how they were met. He then talks about the most controversial result of his research- that crime rates fell as a result of the 1973 Supreme court decision which legalized abortion. The author's theory is that pregnant women tended to live in conditions associated with the later criminality of their children, including low levels of education, single parenthood, and poverty. Thus abortion rights more than any other factor prevented criminals from being born. The author states clearly that proposing abortion as a means of future crime prevention would have huge moral implications. His intent is merely to provide data and thereby illustrate the unintended consequences of a change in public policy.

Chapter 5

There are a lot of parenting experts out there, and they all have different opinions on what the "right" way to raise a child is. These experts are often convincing, but they also inspire a lot of fear in parents. Parents are often scared of raising bad kids, even if the risks of doing so are actually quite low. Experts are good at scaring people with immediate threats, even if the dangers are far off. When it comes to protecting kids, parents often buy products that don't actually do much to keep their children safe. For example, car seats are often seen as a vital way to protect kids in car accidents, but they actually aren't that effective.

Chapter 6

In this chapter, the author discusses the question of perfect parenting. He looks at the names parents choose for their children and asks whether these names predict the children's future life outcomes. He tells the story of two children, Winner and Loser, who were given very different names by their father. Interestingly, Loser went on to have a successful life, while the Winner became a criminal. The author discusses Roland Fryer's research on the segregation of black and white culture in America. Fryer found that black and white families give their children strikingly different kinds of names. This "black-white naming gap" is a recent phenomenon. The author concludes the chapter by discussing the statistical differences between black and white names.

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