Freakenomics Chapter 1 - 2

Chapter 1

1. Explain how the imposition of a fine for tardy parents at a day care center may have altered the motivations of these parents.

• Parents have an economic incentive which makes them focus their attention on finances more so this frees them from the guilt they would have from picking their child up late from day care.

2. What is an incentive? How does it relate to the study of economics?

• Incentives are something that motivates somone to do something and this relates to economics because it deals with the market for consumers, the demand supply and everything else.

3. What examples can you think of where moral or social incentives and economic incentives are both present? Are the different incentives complementary or competing? For each of the cases you cite, which do you think is the stronger incentive?

4. Describe some ways in which a school teacher might be able to improve he scores of his or her students on a standardized test.

A school teacher may be able to improve the scores of his/her students by giving away/ changing answers or actually improving the way they teach.

5. How has a well motivated and seemingly benign government requirement to administer standardized tests to grade school students had unintended and malicious consequences? Can you think of other examples of government regulations that were imposed to acheieve one goal but have had unanticipated consequences?

6. Explain how Levitt devised a means of examining student test scores to uncover evidence if cheating teachers. Explain also why Levitt's analysis of the data constituted evidence, but not proof, of cheating.

7. Explain what incentives, if any, a university might have to artificially improve the test scores and grades of it's athletes.

8. Describe, in general terms, how sumo wrestling tournaments in Japan are arranged and how the rank of an individual sumo wrestler might change as a result  of his performance at one of these tournaments.

9. Describe what it means for a Japanese sumo wrestler  to be "on the bubble"

and what incentives this wrestler and his opponent may have to “throw” a wresting match.

10. How did Levitt construct a means of detecting evidence of cheating among Japanese sumo

wrestlers? What evidence does he offer in support of his claim that some Japanese sumo wrestlers

probably “throw” some of their matches?

11. How did Paul Feldman set up his bagel business in the Washington, D.C. area? How did it differ

from most business models?

12.What do the authors of Freakonomics conclude from an analysis of the Paul Feldman’s bagel sales

data? Do these conclusions match with economists’ expectations of human behavior?

13.What window does an analysis of the sales data of Paul Feldman’s bagel business open? Why is this

usually a difficult subject for economists and others to analyze?

14. Based on what can be learned from a study of sales data of Paul Feldman’s bagel business, what

variables affect the incidence of theft in an office setting?

Chapter 2

1. Describe, in broad terms, how the Ku Klux Klan came into existence and how its level of popularity

varied over time. In addition, identify specific factors that caused the Klan’s popularity to rise or fall.

2. Explain Stetson Kennedy’s role in the Klan’s ultimate decline in popularity in the South, focusing on

the role the dissemination of what the Klan believed was secret information played in that process.

3. Explain what is meant by the term “information asymmetries” and give examples of information

asymmetries we encounter in everyday life.

4. Explain whether, and if so, how, information asymmetries create a competitive advantage for particular individuals.

5. Explain how such innovations as the Internet have affected the prevalence of information asymmetries.

6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s.

7. Provide examples that illustrate how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse.

8. What evidence do the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment? As more clients become aware of the possibility of such behavior by agents, how might it affect the relationship between the two?

9. Explain how the choice of terms a real estate agent uses to describe a particular property conveys

additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller.

10. This chapter examines how the economic incentives of a real estate agent may differ from those of his or her client.What other subject matter experts are often hired by individuals and businesses? Might they have incentives that differ from those of the clients that hire them?

11. Explain how the information a person has can affect his/her propensity to discriminate. As part of your explanation, distinguish between taste-based discrimination and information-based discrimination.

12. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated against in that setting.What type of discrimination is being practiced in each case? Explain.

13. What do the data say about the characteristics of men and women who participate in Internet dating sites relative to the characteristics of the broader population?

14. Assuming many of the people who use Internet dating sites are not being truthful when they describe themselves, what could motivate them to do so, knowing that if they ever actually met a date face-to-face, the truth would likely come out?