Freakonomics

Using Economics to Understand Human Behavior

In the early 1990s, experts predicted a new generation of "superpredators" would drown the United States in a wave of unprecedented violence. Criminologists and politicians alike warned that chaos was inevitable. Then, something strange happened: crime began to fall. The murder rate plummeted to its lowest level in decades. While experts credited better policing or a booming economy, the real cause was more subtle: the legalization of abortion twenty years earlier, which meant that children most likely to be born into adverse environments were never born at all.

This surprising connection illustrates the core principle that incentives are the cornerstone of modern life. Every person, from a teacher to a real estate agent, responds to the specific rewards and penalties they face. Often, these incentives are hidden, creating a gap between how we think the world works and how it actually functions. We see this in politics regarding campaign spending. While the candidate who spends the most money usually wins, the money itself is rarely the cause of the victory. Instead, appealing candidates naturally attract both votes and donations. In reality, Americans spend as much on chewing gum each year as they do on all major political campaigns combined.

Understanding these patterns requires stripping away the layers of conventional wisdom that cloud our judgment. Economics is not just a study of the stock market; it is a powerful set of tools for measuring human behavior. By looking at the data without moral posturing, we can discover the unexpected links that define our daily lives. This approach follows in the footsteps of Adam Smith, who was a philosopher before he was an economist. He was interested in the friction between individual desire and societal norms. By asking the right questions, such as what schoolteachers and sumo wrestlers have in common, we can uncover the hidden side of everything.