Chapter one introduces the concept of incentives, which is defined as “a means of urging people to do more of a good thing or less of a bad thing,” and analyzes how different groups have been incentivized to cheat.
First of all, however, the book defines the three types of incentives: economic (their actions will change their wealth), social (their actions will affect how others perceive them), and moral (their actions are the result of their sense of right and wrong).
showcases how systems of incentives, information asymmetry, and other economic theories impact culture on a scale much larger than merely economic.
By opening our eyes to a host of questions, correlations, and methods, Levitt and Dubner unmask the subtle systems at work that influence how our society operates, from issues as small as how a house is sold to as large as systemic crime.
Much like large corporations, the highest-ranking members take the lion’s share of profits.
This is described as a “winner-take-all” labor market.Abortions are often procured by women unable to provide for a child, and had those children been born, they would be 50 percent more likely to live in poverty and therefore resort to crime.The book explains an opposite case study, in Romania, where abortion was made illegal.While there could be bribes (economic incentives) involved, there is also intense moral and social incentivizing at play, as the sumo community is very tight-knit and the stakes of victory are so high.Chapter two focuses on the theory of information asymmetry in the fall of the Ku Klux Klan and the strategies of modern real estate agents.By the 1940s, while the Klan was no longer as violent as it had been in the past, its mysterious aura and fear rhetoric still held a large sway over the American public.So, a journalist named Stetson Kennedy infiltrated the Klan and disseminated its secrets via a popular radio program, turning mystique into ridicule and dropping its membership drastically.The chapter analyzes a gang, the Black Gangster Disciple Nation, explaining its hierarchy and how profits are distributed.While the top bosses made good money, the rank-and-file members of the gang earned less than minimum wage.Analyzing data from the Early Child Longitudinal Study (ECLS), containing data from over twenty thousand students, Levitt determines that the factors that most affect a child’s success are not the malleable ones (such as whether the child attends Head Start, or gets read to) but rather the immutable ones (such as the parents’ socioeconomic status, education level and age).In the sixth and final chapter, Levitt examines whether the name given to a child impacts its life, long-term.