Film Review #3 - “FREAKONOMICS”

Director: Morgan Spurlock, Alex Gibney, Eugene Jarecki, Heidi Ewing, Rachel Grady, and Seth Gordon

Run Time: 92 minutes

Language: English

“Incentives matter.” This means that people do things because they value those things more than they value other alternatives. “Correlation does not prove causation.” In other words, just because something looks like it is dependent on another thing, it may actually have a different explanation altogether. These are two of the most fundamental concepts of human behavior not only in business and economics, but in life in general.

In the documentary entitled “Freakonomics,” Stephen Levitt and Stephen Dubus (authors of the book of the same name) explain these fundamental concepts of human behavior in simple, easy to understand terms such that anyone may appreciate and apply them in their own lives.

Through elegant and concise narration, the two authors use a series of simple analogies to make these abstract social concepts applicable in the lives of every human being. Often cartoonish, goofy, and somewhat juvenile in their on-screen depiction of certain analogies, the documentary feels light, curious and informal. Levitt and Dubus’ explanations emphasize their dedication to revealing these two core truths in a way that is understood by all no matter your educational background.

The documentary is broken down into 6 sections. Each section explores a different analogy which demonstrates one of the two core principles of human behavior in every day life. Such topics explored by the authors include the relationships between baby names and future success, crime rates and abortion, and incentives structures inherent in issues like cheating in the world of Japanese Sumo wrestling, Teachers cheating for their students in the classroom, real estate agents bias in the sales of existing homes, and parental bribery in getting our kids to do their work. The first three of these subject matters provide an excellent insight into the power and production method of this provocative documentary.

The first section deals with a socioeconomic issue. The question is whether or not baby names, particularly the possession of “distinctively African-American names like Shaniqua or Jaquan” determine a person’s future success.” The data, for example, shows a correlation between lower pay grades and distinctively African-American names. The data also confirms that children with more Caucasian names tend to have higher pay grades. This might lead one to conclude that racism and a more African-American sounding name will doom the bearers of such names to poverty.

But remember…correlation does not prove causation. In fact, upon examining the data further, Levitt and Dubus found that this discrepancy in pay and quality of life is most likely due to the poorer conditions and quality of neighborhoods that these children grew up in rather than their name. The authors discovered that parents from poorer communities with lower levels of education are much more likely to give their babies distinctively black names in order to “prove” their blackness as compared to similar households of greater income and education levels who adopted more Caucasian sounding names. Thus Levitt and Dubus said that though people with distinctively black names tend to earn less than people with more Caucasian sounding names, the true reason for the discrepancy is the environmental conditions and education levels of the area in which the child grows up, not the name itself.

Another case of the principle of correlation versus causation was the spike in crime rates during the late eighties and early nineties and its subsequently dramatic fall in the mid nineties. People were shocked that just as crime rates seemed as if they would continue to rise forever, it suddenly dropped dramatically in the mid-nineties. Among many of the theories cited for this phenomenon was an increased number of active duty policeman, increased numbers of arrests, more innovative policing tactics, and general economic improvement.

The men of Freakonomics, however, refuted that these were the primary causes of such a dramatic fall in crime rates. Though these explanations did account for a combined total of about 50% of crime reductions according to the authors’ analysis, the much bigger reason for crime reduction was the 1973 legalization of abortion in Roe v. Wade.

Levitt and Dubus convincingly demonstrated how the 1973 legalization of abortion helped to combat the greatest factor in criminal potential in young children and therefore the greatest factor in crime rates – unwanted pregnancies and poor parental care. Since women could now abort babies they did not want or were not ready to have, they could choose to wait and go on to have babies later when they would truly love and not neglect the child. In fact, the data shows that crime rates began to fall almost exactly 15 to 20 years after the legalization of abortion when the unborn babies of unprepared mothers and homes would have been in the prime crime-committing age of 15-25 years old. Also, the data indicated that, of mothers who choose to abort, the population of such mothers goes on to have birth rates equal to rates of women who have never aborted. Thus correlation does not prove causation.

However, though Levitt and Dubus determined the underlying problem to be unwanted pregnancies and neglected children, I believe this is yet another symptom of a deeper problem. I believe that underneath this symptom is a lack of maturity, education and responsibility on the part of these young men and women having babies before they are ready. For instance, if women who choose to abort go on to have normal birth rates later in life and the key factor in determining criminal behavior truly is the absence of a loving household, then the real issue is that young people either cannot properly assess the risks and consequences of their sexual activity or they are too immature to think or care about them. If a person cannot handle the consequences of his or her behavior, then it seems logical that this person should not be engaging in that behavior. Thus I believe the solution should start with instilling greater personal responsibility and education into these young parents as opposed to turning to abortion to provide an escape from mistakes.

An example from the film where “incentives matter” was the case of rampant cheating in the prestigious and respected Japanese sport of Sumo wrestling. Officially, the wrestling world and many spectators vehemently denounced such accusations of scandal, and it was indeed hard to prove. However, Levitt and Dubus devised a brilliant yet simple way to mathematically test these accusations by looking at the incentives structure of Sumo matches. They reasoned that since Sumo wrestlers with 8 wins and 6 losses in a typical 15 match tournament stood little to gain from one more win (8 wins would bump a wrestler up a great deal in prestige and monthly pay) while wrestlers with 7 wins and 7 losses stood the most to gain, then these men would have the greatest incentive to throw the outcome of a match. Thus this is where Levitt and Dubus began their investigation.

They found that a typical cheating agreement consisted of a Sumo with 8 wins allowing the 7 win Sumo to get that 8^th win, and in return the newly victorious Sumo would allow the 8 win Sumo to win in their next meeting. In fact, although one would assume that Sumos with such close records of wins and losses should compare almost 50% to 50% in terms of the number of victories in that 15^th match, the economists found that the Sumo with only 7 wins beat their 8 win counterparts nearly 75% of the time. Similarly, of those 7 win Sumos that beat their 8 win counterparts, the 8 win Sumos beat the 7 win Sumos almost 100% of the time in their next meeting! Therefore, by using the knowledge that incentives matter, Levitt and Dubus were able to analyze and prove the existence of cheating in Japanese Sumo.

In sum, “Freakonomics” was a refreshingly creative and innovative take on the questions we face in our lives on a daily basis. It was insightful, provocative, and easily understandable. In fact, I believe that everyone with an inquisitive mind would be remiss should they pass up an opportunity to learn more about the curious case of human behavior. Therefore I would not only recommend everyone to see this documentary but also to buy the book as well. You will not be disappointed.

Reviewed by: Hunter Hodge