May 30, 2005


I just finished reading Freakonomics by Steven D. Levitt & Stephen J. Dubner, it's a scale-up of some articles in the New York Times Magazine (available from

The key insights behind the book:

  • Understandig incentives is the key to understanding the root cause of complex systems of behavior ("modern life").
    They assume that men are rational actors in their economic activity (not necessarily moral actors, as they may cheat, collude, or mislead, but rational).
  • The conventional wisdom is often wrong.
    As my Uncle John used to say "It's generally accepted, so generally accepted it may not be true at all!"
  • Dramatic effects can have distant and subtle causes.
    This does not mean that the authors subscribe to the "Butterfly Effect" (meteorologist Edward Lorenz speculation that "flap of a butterfly’s wings in Brazil might set off a tornado in Texas"). They believe that clear cause and effect relationships hold.
  • Experts use their information advantage to serve their own ends.
  • Knowing what to measure and how to measure it provides simple explanations for complicated situations.
It's a very readable book, but in the immortal words of Mies van der Rohe, "less is more" (or was it actually Robert Browning) and 99.44% of the content in the book can be found in the two articles. I would recommend several others if you are interested in the intersection of economics, systems analysis, and everyday life: These books offer insights and ways of looking at the world that can help orient your questions and thinking. The Freakonomics book is interesting, but doesn't really communicate a fundamental perspective or problem solving paradigm(s). Posted by Sean Murphy at May 30, 2005 5:48 PM | Economics