Freakonomics A Rogue Economist Explores the Hidden Side of Everything - Book Report/Review Example

Question 1 The fine imposed on the tardy parents proved quite successful in motivating their decision-making towards a favorable result to reduce lates. Looking into the problem of worried children waiting for their parents, few of the economists had decided to impose a fine on those parents. As a result, the rate of late coming parents had automatically fallen down. It shows that price system has a strong impact on the decision making trends of people (which also includes customers) (Levitt & Dubner, 2011). For the improvement of the situation, one of the essential steps that could be taken was to increase the amount of fine from $3 to more with every repeat occurrence. It is due to the reason that most of the parents might repeat the same thing of coming late sacrificing the amount charged as fines, which might be quite minimal as per their purchase capacity. In order to change this situation, the fine money must be increased to a certain limit on every occurrence. This system will definitely change the mindset of the parents as they will be much conscious about the value of money being under threat that the fine charged might surpass their purchase capacity. Similarly, in context to the fines charged to the parents, their incentives will be to save the extra charged amount as late fines and minimized waiting duration of their children, which will certainly keep them motivated to change their decision of avoiding lates. Question 2 Information asymmetries, if defined in simple terms, means a particular situation or transaction wherein one of the parties possesses much knowledge than the other party(s). There are numerous instances of information asymmetries in the everyday life of the people. One of the most common instances in the everyday activity is while buying grocery items for household purpose. The owner of the commodities has the complete knowledge of the products and also the capacity of motivating the buyer to purchase. On the other hand, the buyer will not have much knowledge about those products and might not trust the owner or seller. The other similar example is of the insurance market. While insuring a property, the insurer is quite unaware of how the customer will take care of that property. Before opting for the purchase of the insurance product, the insurer cannot completely rely on the insuree regarding the maintenance of the property to be insured owing to his personal lack of know-how in the matter (Levitt & Dubner, 2011). The use of internet has played a major role in affecting the information asymmetries in today’s society. Internet has been performing its task of sharing the required information from one party to another, who lacks the same. Internet has also provided the people with complete knowledge of any kind of situations or subjects. In this modern scenario, the popularity of internet has brought about a wide range of changes through providing knowledge on any subject to the human beings and thus has influenced the information asymmetries (Levitt & Dubner, 2011). Question 3 As interestingly noted in the book titled “Freakonomics”, drug dealers are often observed to prefer staying with their parents. The reason behind it can be quoted as the false need for “conventional wisdom”. In the words of Levitt & Dubner (2011), “conventional wisdom is often found to be a web of fabrication, self-interest, and convenience”. Applying the same theory, it can be inferred that it is because of the need for the drug dealers to form ‘a web of fabrication’ around them to avoid arrests, or because of their self-interests and personal need for convenience, that they prefer staying with their moms. But as Levitt & Dubner (2011) also argues, similar to the notion of “conventional wisdom”, such a fact may not always be a truth. In Levitt & Dubner (2011) it was argues that few of the economists believe people involved in drug dealing industry have the adequate supply of cash money, which provokes them to enter into business in drug trafficking to suffice their greed for more money. However, as a matter of fact, most of the drug dealers have the adequate knowledge of economics, which also helps them to earn a huge amount of profit. This notion can be unambiguously explained with the law of demand and supply. The law of demand and supply states that if there is a low supply of a product and high demand, it is obvious that the price will rise up. Similarly, as can be noted in the present business scenario, there is a rising demand of the drugs resulting from the increasing toll of substance abusers and increasing purchase ability of the customers, but its demand tends to be comparatively inadequate due to the security reasons. This automatically raises the price higher and provides the dealers with an opportunity of making more money within a short span (Levitt & Dubner, 2011). This is how in the illegal drug trafficking industry, the drug dealers are often blessed with a good amount of money. However, the workers are highly impacted with the dealing of drugs. Being a part of this industry, workers have to work in a highly hazardous environment. In this case, if they were working in any other industry, they might have obtained a better scope to work in hazard free conditions, although that would require them to sacrifice a proportion of their gained amount through drug trafficking within the specified time span. Hence, this can be recognized as the opportunity cost for drug dealers (Levitt & Dubner, 2011). Question 4 The reason for economists to fail anticipating the changes (reduction) in crime rate was rooted to the confusion of correlational attributes and the causality features associated with such an initiative. The three fundamental reasons that contributed to the reduction of potential criminals in the US during the 1995 were the gun control measures adopted by the then American Government; focusing on clever strategies of police to counter crimes within the counties and more opportunities for people to acquire a handsome paying job. With these considerations, the need for doing crime or the motivation of potential criminals became diverted resulting in a better social construction aimed at continuous economic progress and limited crimes (Levitt & Dubner, 2011). As per my understanding, it was the growth in the well-paying job opportunities for people in the country that lessened the number of potential criminals rather than increasing their numbers as was anticipated by economists. However, contribution of other two reasons is also not without their added value. Question 5 “Fear mongering” is the action of spreading any kind of fearful rumors or utilizing fears as the means to impact the opinion of people. The parents are more conscious about the well-being of their child and also fear is considered as an inherent quality among the parents. For this reason, parents are more susceptible towards fear mongering (Levitt & Dubner, 2011). In books, which concentrates more on grabbing the attention of parents based on their fear and inadequacies, the most common forces utilized is the consciousness, lack of confidence and worries regarding their children. As mentioned in Levitt & Dubner (2011), consciousness makes a parent more aware of their child’s well-being besides the fear or lack of confidence that their children do not have such ability to differentiate between their good and bad due to which they require continuous guidance. Hence, all these factors contribute to the fear and inadequacies possessed by the parents regarding their child, which motivates them to buy books that appeal to a parent’s fears and inadequacies (Levitt & Dubner, 2011). Lastly, it can be affirmed that as per the entire study and the data developed from the ECLS, what a parent does for their child is more important regarding their child’s success. Parents must be conscious regarding their child’s success and also contribute accordingly instead of making attempts to take authoritative control over their child’s preferences. This nature of the parents will also provide the children with motivation of achieving their goals and aimed success (Levitt & Dubner, 2011). Therefore, it can also be concluded that parent’s contribution plays a significant role in ensuring the success of the child. Reference Levitt, S. D., & Dubner, S. J. (2011). Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. New York City: HarperCollins. Read More