Chapter 1: What do Schoolteachers and Sumo Wrestlers have in common? By starting the chapter off with a study between two economists who tried to find a solution for parents who repeatedly came late to pick up their children from daycare, Steven Levitt discusses the concept of incentives and its benefits and weaknesses. An incentive is something that tends to incite an action for the greater effort, as a reward offered for increased productivity. Basically, an incentive is used to motivate someone to do more “good things and less of the bad things.
Essentially, at root, the study of incentives is economics: “how people get what they want or need, especially when other people need or want the same thing. ” Incentives are issued usually for a good thing. For instance, Chesapeake Energy paid out more than $8 million in “safety bonuses” in 2011 to workers who practiced the safety ethics while working. Here, we see incentives helping both the employer and employee: the employee receiving money for practicing safety in the workplace and the employer having the employees practice safety.
There are three types of incentives: economic, social, and moral. Economic incentive is an incentive that helps the person economically like make more, for instance. A social incentive helps a person move up the social ladder or become higher in rank. Finally, a moral incentive assists a person morally, for instance, a CEO thanks all his employees for their hard work. It shows recognition towards people. Although incentive may have flaws, I believe incentives are recommended in a workplace. It stimulates production making both making the employer and employee happy.
Intelligently designed incentives can be a boom to companies looking to retain employees for the long term. Incentives make it worthwhile for employees to stay at someone’s firm, even if a salary offered from a competitor is more attractive. Incentives can also make employees feel as if their hard work is appreciated, thus reflecting well on their managers and the company as a whole. So, what do schoolteachers and sumo wrestlers have in common? Both of them have the incentive to cheat for monetary gains, moral successes or just to increase in social rank.
Schoolteachers cheat by giving students answers during tests, so it looks like the students are improving, and the teachers get a promotion or more money. Sumo wrestlers cheat because they want to help their opponent so they don’t fall drastically in their rank. It is possible that the sumo wrestlers may be getting a bribe to do this or it’s just a matter of their moral value. Essentially, both have the incentive to cheat. Although I know this is erroneous, both are only doing just to gain money. There should be other ways they could get a promotion or more money or increase in social class.
Clearly, incentives should only have a positive outcome and should prevent negative actions. Chapter 2: How is the Ku Klux Klan like a Group of Real-Estate Agents? Information is everywhere no matter where you go, be it the store, the library, or even the internet. Information is what is conveyed or represented by a particular arrangement or sequence of things according to Merriam Webster. Information is so powerful “that the assumption of information, even if the information does not actually exist can have a sobering effect. ” Information is a very strong thing.
While chapter one focuses primarily on the role of incentives, chapter two discusses the phenomenon of information asymmetry. Information asymmetry is when one party, usually the seller, has more information than the other party (buyer), therefore having an information advantage over the buyer. For instance, real-estate agent has more information about the house than the buyer because he knows the house. Now, the agent can use that information and convince the buyer that the certain house is the right house for them and pay the price the seller wants them to pay. In my opinion, information asymmetry is unfair and unjust for the buyer.
Experts who have more information than buyers can use this to instill fear in consumers, who believe they may not be able to get a better deal elsewhere or that they need a certain product or service right away for whatever reason. However, it is clever for the seller to have that information to make more money. I believe it is smart for the seller to have an information advantage but it is unjust for the buyer. So, How is the Ku Klux Klan like a Group of Real-Estate Agents? Because, the KKK had secret information that only they knew and the public did not know. They used this “information” to instill fear in the people and terrorize them.
They were able to use their informational advantage to create an air of fear surrounding their group. The balance of information was leaning towards the KKK which they had the advantage. However, when Stetson Kennedy released the information to the public the group demolished and did not exist anymore. Clearly, I believe that information asymmetry is advantage for only one group of people. It is unfair for the other group because it is essentially like blackmailing because you know information about someone and the person doesn’t want the public to know about it. I find information asymmetry clever but also unfair.
Chapter 3: Why do Drug Dealers still live with their Moms? One of the most profitable jobs in America: drug- dealing, particularly crack-dealing. In this chapter of the novel, the authors explore why many drug dealers still live with their parents despite their dangerous occupations and the risks involved. The answer is simple, because drug dealing isn’t a job that involves a lot of monetary and personal benefits except for the people who are high in drug- dealing rank. The drug dealers need a lot of money to have their own house, therefore because of the lack of money the dealers live with their parents.
The questions arises why do these drug-dealers do these dangerous jobs and not make money that they are still living with their mothers? The answer is simple: the tournament of life. These “petty drug runners” deal crack because they believe they could move up in social rank and make over 100,000 dollars, even though, the boss and few higher-ups of the gang were the ones that made the big bucks. The possibility that a runner would become a higher-up was slim to none, yet for people from these poor neighborhoods, slim was better than nothing. Hence, the phrase the tournament of life was found.
The tournament of life is a phrase that describes people who are at the bottom and work their way up to the highest positions available. A tournament is a series of contests in which a number of contestants compete and the one that prevails through the final round is declared the winner. Therefore the tournament of life is that you are at the bottom of the pyramid with the lowest paying job and you have to work hard to increase in rank to make more money. The topic of incentives is bought up again. Why do these workers still continue to do these low paying jobs?
Because they have the incentive that they will increase in rank and make more money. Clearly in my opinion, the tournament of life is just life in general. We live in a capitalist society and based on the capitalistic principles life is going to be a tournament. Chapter 4: Where have all the criminals gone? In this chapter of the novel, Levitt and Dubner discuss the relationship of abortion to crime rate and criminals. Crime rates during the 1990s dropped for multiple reasons. However, Levitt disagrees to the conventional belief of why the crime rate dropped.
The conventional belief of why the crime rate has multiple beliefs. The strong economy that contribute to the national income during the 1990s was to believe to have drop the crime rate because most Americans had jobs available. However, according to the novel, the strong economy only dropped the crime rate of thefts, robberies, and burglaries. The rate of murders and homicides was still high regardless. The other part of the belief was that different police strategies, increasing the number of police officers and strict gun laws helped lower the crime rate.
These strategies, however, only concerned about the immediate consequence and what was done to stop the crime in the short term. However, in the long run according to Levitt and Dubner these strategies proved to be ineffective and not dropping the crime rate. Although the establishment of prisons did help lower crime, even though it was only for a certain time. However, according to Levitt’s belief of why the crime rate dropped was legalizing abortion that resulted from the court case in Roe vs Wade. This led to a decrease in the children born into families where there was a high chance they’d grow up to commit crimes.
Now parents with low incomes have a choice to either have their children not grow up and become criminals. After reading this chapter, I agree with Levitt’s belief of why crime rates dropped. Although the conventional belief would be the most obvious answer, I can see why abortions led to the decrease of crime. Like most people, I would not have thought that abortion decreased the crime rate. The new abortion laws are a subtle cause of a greater effect on decreasing crime during the 1990’s.
Chapter 5: What makes a Perfect Parent? Chapter 5 asks the question, “What makes a perfect parent? Every parent has their own way of raising their children and often these ways contradict each other. In my opinion, what makes a perfect parent is that the parents care for the child since their born regardless of their status, wealth or job. The parent should be like animals who care for their children. Another thing is that the parent should make sure the child should go to the right school. In my opinion if both of these are done that will make a perfect parent. However, Levitt and Dubner have different opinions on what makes the perfect parent.
According to the authors, those two factors do not make the perfect parent as a matter a fact they do not matter at all. As a matter of fact, what matters in parenting is who the parents are and not what they do. This means that everything predetermined before the child is born on how the child is going to be raised. So, what makes a perfect parent? Highly educated middle age parents with high socioeconomic status are far more likely to have a successful child than one who has a low income family. Parents with higher education and social status often have higher IQ’s and value education much more than those who didn’t have as much schooling.
Middle-aged parents are usually more financially stable then their younger counterparts, and can provide children with more opportunities. These issues all matter in parenting while issues like living in a better neighborhood, letting the child watch T. V. , going to museums or reading a book everyday to a child do not matter. All the things that matter in parenting are already determined before the child’s birth. It does not matter what the parent do; what matters is what environment is the child being born into.
Parenting matters a great deal, but not the way people think it does. Chapter 6: How much does your name determine the chance of success in your life? People around the world believe that one’s name determines the chance of success in their life. Everyone believes that their name determines their future and that is what Robert Lane thought by naming one of his children Winner and the other Loser. Robert Lane believed by naming his child Winner he will become successful, and even though he had no bad intentions of naming his other child Loser he believe he wouldn’t be as successful.
Now, one may believe that Winner succeeded and that Loser did not. However, this is not the case. As a matter a fact, Winner became drug addict while Loser became a dedicated college student and succeeded in life. The question arises Why did Loser succeed, while Winner become involved with drugs even though the names are opposites? As continuing the previous chapter’s idea, Levitt and Dubner mention that the names do not determine the chance of success in your life. It is not what parents do that determines the child’s future; it is who the parents are.
This scenario shows us the difference between correlation and causation. Although names may be correlated with success, it necessarily does not mean these names cause success. So, how much does your name determine the success of your future? The answer is simple: zero percent. It’s who your parents are that determine the success of your future. However, as families who have higher income the children’s name becomes more increasingly obscure because it has more value. So, when these names become common they lose their value high income families look for another names.
However, name don’t determine the success of one’s future. I could be called King it doesn’t mean I’ll become a king or vice versa if my name is gangster it doesn’t necessarily mean I’ll become a gangster. It depends on how parents are. In my opinion, name does not predict your success; I agree with Levitt and Dubner on this issue. I believe how the parents are raised and how successful they are will affect the child’s success. Clearly, success does not lie in one’s name as a matter of fact it lies in how successful the parents are.
