Chapter 4

Chapter 4 starts off with the interesting comparison between the abortion ban in Romania and the crime in America. Later on in the chapter, Levitt shows the connection between abortion and crime and how legalizing abortion has led to a decrease in the crime rate. The reasons noted are that children are not brought up in unstable homes, such as one parent homes, parents unable to raise a child due to money or age, and others. It seems to me that these factors are legitimate factors in how a child acts. If he or she is brought up in a loving home, they know how they should act, even though they may not always act that way. If they are not, they do not know how to react and start doing whatever they want, including crime.

He also talks about seven reasons noted in newspapers for the drop in the crime rate, and how some were backed-up by research and some were just opinions of the writers. The reasons that did hold true were increased reliance on prisons, increased number of police, and the bursting of the crack bubble. All of these reasons seem to make sense, and all are backed by the data researched. The others I thought would have been factors in lowering crime, especially innovative policing strategies, but I guess I wasn't looking at the big picture.

I thought it was interesting when the book showed the chart on how many weeks of pay an employee was compensated for when they damaged or lost a body part. It's interesting to see how companies few how important a certain body part is. But how do you value a body part? It is very difficult and varies among different people. This coincides with punitive damages: How much money should you get above and beyond compensatory damages for being injured by the defendant? Sometimes the punitive damages are TOO much ($1 million for a scratched arm).

Chapter 3

Just got done reading Chapter 3, and I'm noticing the theme of strange questions being asked in each chapter and then going into detail about answering the questions.

The whole story about the Black Gangster Disciple Nation and drug dealing was very interesting. The fact that Sudhir Venkatesh would go into those dangerous conditions to find that information was very courageous and showed that he was very interested in the topic. He did gather some very valuable information that few would venture to gather. If I was the teacher sending him into those conditions, I would feel very bad if anything happened to him.

I thought the whole ranking of the drug dealing business was interesting. The whole drug dealing propaganda is much more complicated and thought-out than I thought it was. There is actually a business-like structure to it. The amount of money that is brought in by drug dealing blew me away! J.T., the gang leader, was making $100,000 a year! I guess I can see why some would be tempted to come to the "dark side." J.T. had a college degree and still went to drug dealing. I suppose this works for people with a large hunger for money. I feel most people would not want to deal with the risk or guilt involved in this dangerous "profession."

I was wondering why anyone would actually want to deal drugs, as the threat of violence, jail time, or even death was very real. But it made sense after I read that those in the business are trying to work they're way up in a competitive industry made sense. The example of a high-school football player waking up at 5 a.m. to lift weights was a good one. It shows that even though, in both cases, the chances of making it to the top of the pyramid is low, the chance that it could happen drives those involved to continue what they are doing. It keeps them highly motivated. Perhaps that is why we are all in the MBA program: we are highly motivated in a competitive industry, and we want to separate ourselves from the pack. It is hard work, but in the end it is worth it.

Chapter 2

I've gotten a bit behind on Freakonomics, but none-the-less, I am here posting on Chapter 2.

Chapter 2's main focus was on information asymmetry - when one party knows more about a product than the other party. Being in the MBA program, we all know much about this topic. Businesses use information asymmetry to gain a profit. An example from the book was selling houses. Sellers will use certain words in newspaper ads to hide the condition of a house; they will use words like "fantastic" or an exclamation point to build up the house to be better than it actually is. In these cases, there are things about the house that the seller wants to hide.

Another interesting topic in the chapter was the prices of term life insurance. I don't know much about term life insurance or insurance in general, but what was described in the chapter made sense. Since term life insurance is usually a constant price, as opposed to health or dental insurance, term life insurance would go down when information asymmetry is evened out due to the Internet.

This is similar to auto insurance dealers like Geico and State Farm. Auto insurance dealers used to make offers to customers and they had little information about competing prices from other insurance dealers. Customers had to either accept the offer or decline it and move on to another dealer. Now, customers can go on the Internet, go to each auto insurance Website, and view each dealers' prices. Sites now have their own prices and the prices of competing companies so that they can compare prices all on one site. In my opinion, the competing prices might not be the most accurate, as the insurance companies want to make their prices look the best, so they probably manipulate the others prices in one way or another. Just my opinion....

One problem with the Internet is that you don't see items right there in front of you, in black and white (figuratively). You see it across a computer screen. You can't see and touch that car or TV right in front of you that you want to purchase. You have to take pictures as an honest representation of. By the time it gets to you, it could be changed or manipulated from when you saw it over you Internet connection. You could argue, but the seller could make something up, and sometimes it may not be worth your time to argue.

Information asymmetry is prevalent in Internet sites such as Ebay. When a seller is selling an item on Ebay, they could describe the item so that it makes it seem the item is in better condition than it really is. Ebay has combated this by using feedback from buyers and sellers to keep people honest, and if a user gets enough negative feedback, they can get their account temporarily or permanently suspended.

I will be back soon with Chapter 3!