Chapter 4
1. In economic terms, what was Nicolae Ceau_escu’s rationale for banning abortion in Romania, i.e., how did he see banning abortion befitting the Romanian economy?
2. Describe the incentives Ceau_escu used to increase the birth rate in Romania.Were these incentives effective? Explain.
3. As a result of Ceau_escu’s policies, what happened to the average quality of life in Romania? Provide an economic explanation for the change that occurred.
4. Describe the general behavior of the crime rate in the United States between 1970 and 1999, i.e., indicate whether it was increasing or decreasing from year to year.
5. List each of the explanations of the drop in the crime that occurred in the 1990s that are evaluated by Levitt and Dubner.
6. Of the explanations you identified in the previous question, which ones do not appear to in fact be valid? Which ones do appear to in fact be valid?
7. The argument linking the drop in crime to the robust economy in the1990s would seem to be quite strong. Provide a brief explanation of what the data have to say about the viability of this explanation.
8. What rationale do some criminologists offer for the argument that imprisonment rates should be lowered as part of the effort to reduce crime in the United States? Was their logic sound? If not, what fallacy did they commit?
9. What does the available evidence have to say about whether increased reliance on prisons is a viable explanation for the drop in crime in the 1990s?
10.What does the available evidence have to say about whether increased reliance on capital punishment is a viable explanation for the drop in crime in the 1990s?
11. Explain how an increase in the number of police officers could cause the crime rate to decline. Does the evidence support this explanation of the drop in crime in the 1990s? Explain.
12. Many observers maintained that the drop in crime in the 1990s was at least in part due to the adoption of innovative policing strategies. Focusing on the experience in New York City, what do the data tell us about the viability of this assertion? Should we then conclude that smart policing is not a good thing? Why or why not?
Chapter 5
1. Why are parents more susceptible to “fearmongering” than other people?
2. What market forces give rise to parenting books that appeal to a parent’s fears and inadequacies rather than books which present an objective and evenhanded articulation of the state-of-the- science of good parenting?
3. How does the information in this chapter regarding the contradictory and confusing assemblage of information from parenting experts support the major theme of this book (Hint: incentives matter)?
4. Based on the example of perfect parenting in this chapter, provide examples that illustrate how the combination of asymmetric information and fear can lead to inefficient outcomes.
5. When looking at statistical data over a period of time, what does “correlation” mean? How is it different from “causation?”
6. What tool does an economist use to make sense of data which include many variables? In general terms, how does regression analysis sort out the data?
7. Describe the difference between normative and positive analysis.What can you learn about the utility of this distinction from this chapter on perfect parenting?
8. Describe, in general terms, the Early Childhood Longitudinal Study (ECLS)? Who conducted it, who was the target of the study, and what was the purpose of the study?
9. According to the data in this chapter, what are the main differences between a school which overwhelmingly has black students versus a school which overwhelmingly has white students?
10. Academically, how well does an average black student do in a “bad” school? How is this different from an average white student in a “bad” school?
11. According to the data developed from the ECLS, what is more important regarding a child’s success on standardized tests: what a parent does for a child or what a parent is? In your opinion, what might be an explanation for such a strange conclusion?
12. According to the data developed from the ECLS, having lots of books in the home is correlated with higher scores on a child’s tests, reading to the child nearly every day is not. If a parent were only interested in having his or her child achieve higher scores on standardize tests, what would you imagine his or her benefit/cost considerations to be when it came to the purchase of books and this use of his or her time?
13. According to the data developed from the ECLS, a low birth weight is correlated with lower test scores on standardized tests, but the attendance by a child in the Head Start program is not. If you were a government official with limited financial resources, how would this inform your decisions regarding the allocation of government funds?
Chapter 6
1. What do the experiences of Winner Lane, Loser Lane, and Temptress tell us about the likely relationship between a child’s name and his/her prospects for success in life? Are these examples sufficient for us to draw any definitive conclusions? Why or why not?
2. Explain what Roland G. Fryer was trying to get at when he decided to explore the following question: is distinctive black culture a cause of the economic disparity between blacks and whites or merely a reflection of it?
3. Why is the California birth certificate data set so valuable from the economist’s perspective? In particular, what type of data does it include that would be of interest to economists? Why are the variables you listed so useful/valuable?
4. What do the California names data tell us about the similarity between the names black parents and white parents gave their children up until the early 1970s and in the period of time since then?
5. Summarize the degree of uniqueness of names given to black girls and black boys revealed in the California names data.What do the authors cite as the most likely cause of this phenomenon?
6. Summarize the characteristics of a black parent who is most likely to give his/her child a distinctively black name.
7. Explain how an “audit study” is used to determine whether having a very “white” name or a very “black” name matters.
8. Are the results of audit studies regarding the effects of a person’s name on that person’s prospects for success reliable? If not, why not?
9. According to the analysis of the California names data, does a person with a distinctively black name have, on average, a worse life outcome than a person with a distinctively white name? If so, is it the fault of the name? If not, explain what the data are telling us.
10. Is there a discernible pattern in how certain names move through the population over time? If so, describe it.
11. Is a low-income parent more likely to choose the name of a celebrity or the child of an upper-income family for his/her own child.Why?
12.According to the California names data,what are many parents trying to signal when they choose a particular name for their child?
Saturday, May 28, 2011
FreakEconomics: Chapter 1, 2, 3
1.How the imposition of a fine for tardy parents at a day care center may have altered the motivations of these parents? The parents would have a reason to be prompt as apposed to an excuse to being late since they have to pay a fine anyway.
2.What is and incentive, and how does it relate to the study of economics?
An incentive is something that encourage one to take a particular action. In economics, incentives are enforced to keep service in circulation.
3.What examples can you think of where moral or social incentives and economic incentives are both present? Are the different incentives complementary or competing? For each of these cases you cite which do you think is stronger incentive?
Charities want to make money to help the unfortunate. Give good to those who contribute, and those who contribute are helping a good cause. They are complimentary and the moral cause is stronger.
4.Describe some ways in which a school teacher might be able to improve the scores of his or her students on a standardized test.
Answer: Give them incentives to want to study to make a good grade.
5.How has a well motivated and seemingly benign government requirement to administer
Answer: An example of another incentive. The people will not do things on their own.
6.Explain how Levitt devised a means of examining student test scores to uncover evidence of cheating teachers? Explain also why Levitt's analysis of the data constituted evidence, and grades of its athletes.
Answer: He watched the scores. It contained evidence because the scores would change only due to the reward teachers would receive from greater scores.
7.Explain what incentives, if any, a university might have to artificially improve the test scores and grades of its athletes?
Answer: The incentive of doing more of a good thing. Them improving the scores wouldn't hurt as much and they would get a reward for it.
8. Describe, in general terms, how sumo wrestling tournaments in Japan are arranged and how the rank of an individual sumo wrestler might change as a result of his performance at one of these tournaments.
9. Describe what it means for a Japanese sumo wrestler to be "on the bubble"
and what incentives this wrestler and his opponent may have to “throw” a wresting match.
10. How did Levitt construct a means of detecting evidence of cheating among Japanese sumo
wrestlers? What evidence does he offer in support of his claim that some Japanese sumo wrestlers
probably “throw” some of their matches?
11. How did Paul Feldman set up his bagel business in the Washington, D.C. area? How did it differ
from most business models?
12.What do the authors of Freakonomics conclude from an analysis of the Paul Feldman’s bagel sales
data? Do these conclusions match with economists’ expectations of human behavior?
13.What window does an analysis of the sales data of Paul Feldman’s bagel business open? Why is this
usually a difficult subject for economists and others to analyze?
14. Based on what can be learned from a study of sales data of Paul Feldman’s bagel business, what
variables affect the incidence of theft in an office setting?
Chapter 2 Q & A
1. Describe, in broad terms, how the Ku Klux Klan came into existence and how its level of popularity
varied over time. In addition, identify specific factors that caused the Klan’s popularity to rise or fall.
2. Explain Stetson Kennedy’s role in the Klan’s ultimate decline in popularity in the South, focusing on
the role the dissemination of what the Klan believed was secret information played in that process.
3. Explain what is meant by the term “information asymmetries” and give examples of information
asymmetries we encounter in everyday life.
4. Explain whether, and if so, how, information asymmetries create a competitive advantage for particular individuals.
5. Explain how such innovations as the Internet have affected the prevalence of information asymmetries.
6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s.
7. Provide examples that illustrate how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse.
8. What evidence do the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment? As more clients become aware of the possibility of such behavior by agents, how might it affect the relationship between the two?
9. Explain how the choice of terms a real estate agent uses to describe a particular property conveys
additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller.
10. This chapter examines how the economic incentives of a real estate agent may differ from those of his or her client.What other subject matter experts are often hired by individuals and businesses? Might they have incentives that differ from those of the clients that hire them?
11. Explain how the information a person has can affect his/her propensity to discriminate. As part of your explanation, distinguish between taste-based discrimination and information-based discrimination.
12. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated against in that setting.What type of discrimination is being practiced in each case? Explain.
13. What do the data say about the characteristics of men and women who participate in Internet dating sites relative to the characteristics of the broader population?
14. Assuming many of the people who use Internet dating sites are not being truthful when they describe themselves, what could motivate them to do so, knowing that if they ever actually met a date face-to-face, the truth would likely come out?
Chapter 3
1. What is “conventional wisdom?” What are some ways that “conventional wisdom” comes into being?
2. Explain why challenging the “conventional wisdom” with regard to a sticky social issue may be difficult to do.
3. Considering this chapter’s analysis of the transformation of Listerine from an antiseptic to a cure for halitosis, what can one conclude about the effect of advertising on market demand for a good or service?
4. Explain how the incentives of police departments and the public media gave rise to explanations of the rising crime rate in the 1980s that were totally wrong.
5. Describe, in general terms, the organizational structure of the Black Disciples street gang. How is it similar to the organizational structure of most business?
6. Explain how four years of financial records of the Black Disciples street gang found their way into the hands of a University of Chicago graduate student.
7. How did J.T., a branch leader of a Black Disciples street gang, acquire and maintain a regional monopoly over crack cocaine within the territorial domain of the gang?
8. What are monthly costs incurred by J.T.’s unit of the Black Disciples? Which costs would be considered fixed costs? Which would be considered variable costs?
9. Explain how a “tournament” or “winner take all” labor market works.Why would a street-level drug dealer be willing to accept low pay and poor working conditions?
10. Give your own examples of a “tournament” type of labor market.
11. How do the incentives of the street-level drug salesman differ from those of the gang leader/ franchise owner? Are they both attempting to maximize the profits of the gang? Why or why not?
12. How did the invention of crack cocaine transform the urban street gang?
13. According to the data cited in this chapter, civil rights laws and a shift in the attitudes in the United States regarding race helped to improve the status of black society. How did crack cocaine alter that progress?
14. Based on the examples in this chapter, what does the invention of better and cheaper production methods do to the price and sales of a good or service?
2.What is and incentive, and how does it relate to the study of economics?
An incentive is something that encourage one to take a particular action. In economics, incentives are enforced to keep service in circulation.
3.What examples can you think of where moral or social incentives and economic incentives are both present? Are the different incentives complementary or competing? For each of these cases you cite which do you think is stronger incentive?
Charities want to make money to help the unfortunate. Give good to those who contribute, and those who contribute are helping a good cause. They are complimentary and the moral cause is stronger.
4.Describe some ways in which a school teacher might be able to improve the scores of his or her students on a standardized test.
Answer: Give them incentives to want to study to make a good grade.
5.How has a well motivated and seemingly benign government requirement to administer
Answer: An example of another incentive. The people will not do things on their own.
6.Explain how Levitt devised a means of examining student test scores to uncover evidence of cheating teachers? Explain also why Levitt's analysis of the data constituted evidence, and grades of its athletes.
Answer: He watched the scores. It contained evidence because the scores would change only due to the reward teachers would receive from greater scores.
7.Explain what incentives, if any, a university might have to artificially improve the test scores and grades of its athletes?
Answer: The incentive of doing more of a good thing. Them improving the scores wouldn't hurt as much and they would get a reward for it.
8. Describe, in general terms, how sumo wrestling tournaments in Japan are arranged and how the rank of an individual sumo wrestler might change as a result of his performance at one of these tournaments.
9. Describe what it means for a Japanese sumo wrestler to be "on the bubble"
and what incentives this wrestler and his opponent may have to “throw” a wresting match.
10. How did Levitt construct a means of detecting evidence of cheating among Japanese sumo
wrestlers? What evidence does he offer in support of his claim that some Japanese sumo wrestlers
probably “throw” some of their matches?
11. How did Paul Feldman set up his bagel business in the Washington, D.C. area? How did it differ
from most business models?
12.What do the authors of Freakonomics conclude from an analysis of the Paul Feldman’s bagel sales
data? Do these conclusions match with economists’ expectations of human behavior?
13.What window does an analysis of the sales data of Paul Feldman’s bagel business open? Why is this
usually a difficult subject for economists and others to analyze?
14. Based on what can be learned from a study of sales data of Paul Feldman’s bagel business, what
variables affect the incidence of theft in an office setting?
Chapter 2 Q & A
1. Describe, in broad terms, how the Ku Klux Klan came into existence and how its level of popularity
varied over time. In addition, identify specific factors that caused the Klan’s popularity to rise or fall.
2. Explain Stetson Kennedy’s role in the Klan’s ultimate decline in popularity in the South, focusing on
the role the dissemination of what the Klan believed was secret information played in that process.
3. Explain what is meant by the term “information asymmetries” and give examples of information
asymmetries we encounter in everyday life.
4. Explain whether, and if so, how, information asymmetries create a competitive advantage for particular individuals.
5. Explain how such innovations as the Internet have affected the prevalence of information asymmetries.
6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s.
7. Provide examples that illustrate how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse.
8. What evidence do the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment? As more clients become aware of the possibility of such behavior by agents, how might it affect the relationship between the two?
9. Explain how the choice of terms a real estate agent uses to describe a particular property conveys
additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller.
10. This chapter examines how the economic incentives of a real estate agent may differ from those of his or her client.What other subject matter experts are often hired by individuals and businesses? Might they have incentives that differ from those of the clients that hire them?
11. Explain how the information a person has can affect his/her propensity to discriminate. As part of your explanation, distinguish between taste-based discrimination and information-based discrimination.
12. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated against in that setting.What type of discrimination is being practiced in each case? Explain.
13. What do the data say about the characteristics of men and women who participate in Internet dating sites relative to the characteristics of the broader population?
14. Assuming many of the people who use Internet dating sites are not being truthful when they describe themselves, what could motivate them to do so, knowing that if they ever actually met a date face-to-face, the truth would likely come out?
Chapter 3
1. What is “conventional wisdom?” What are some ways that “conventional wisdom” comes into being?
2. Explain why challenging the “conventional wisdom” with regard to a sticky social issue may be difficult to do.
3. Considering this chapter’s analysis of the transformation of Listerine from an antiseptic to a cure for halitosis, what can one conclude about the effect of advertising on market demand for a good or service?
4. Explain how the incentives of police departments and the public media gave rise to explanations of the rising crime rate in the 1980s that were totally wrong.
5. Describe, in general terms, the organizational structure of the Black Disciples street gang. How is it similar to the organizational structure of most business?
6. Explain how four years of financial records of the Black Disciples street gang found their way into the hands of a University of Chicago graduate student.
7. How did J.T., a branch leader of a Black Disciples street gang, acquire and maintain a regional monopoly over crack cocaine within the territorial domain of the gang?
8. What are monthly costs incurred by J.T.’s unit of the Black Disciples? Which costs would be considered fixed costs? Which would be considered variable costs?
9. Explain how a “tournament” or “winner take all” labor market works.Why would a street-level drug dealer be willing to accept low pay and poor working conditions?
10. Give your own examples of a “tournament” type of labor market.
11. How do the incentives of the street-level drug salesman differ from those of the gang leader/ franchise owner? Are they both attempting to maximize the profits of the gang? Why or why not?
12. How did the invention of crack cocaine transform the urban street gang?
13. According to the data cited in this chapter, civil rights laws and a shift in the attitudes in the United States regarding race helped to improve the status of black society. How did crack cocaine alter that progress?
14. Based on the examples in this chapter, what does the invention of better and cheaper production methods do to the price and sales of a good or service?
Monday, March 7, 2011
The four types of resources
The four types of resources are land, labor, capital, and entreprenuership. The first resource land is a resource where we build and put our human resources on. Land is a scarce resource. Competition for land is the reason why it is a scarce resource. The need for factories, and stores, and buildings, and all these different things that we want in life that have to be produced from our resource land. Another resource is labor which is needed to produce all the things that we need and want in life. Capital, another resource are assets available for use in the production of further assets.
The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.
Two Goods: A simplifying assumption of production possibilities analysis is that the economy produces only two goods. In that the economy actually produces tens of thousands of different goods, this is one of these seemingly unrealistic assumptions. It is, however, a useful simplifying assumption. Limiting the analysis to two goods means that only two dimensions are needed to display graphs and curves. Two dimensions can be shown easily on paper or a computer screen. But, best of all, most conclusions reached for two goods and two dimensions apply, in principle, to tens of thousands of goods. And if necessary, more than two goods can be handled using advanced mathematics.
Fixed Resources: A second assumption is that the economy has limited and fixed quantities of resources. This is both a reasonable assumption, given the limited resources aspect of the scarcity problem, and also one that makes for useful and interesting analyses. There is no question that the economy has limited amounts of labor, capital, land, and entrepreneurship at any given time. This is the reasonable aspect of this assumption. However, these quantities of scarce resources are also bound to change, especially increase, over time. The initial assumption of fixed resources makes it possible to analyze the consequences of any changes, especially as it affects economic growth.
Fixed Technology: A third assumption is that the economy has a fixed level of technology. Technology is the information and knowledge that society has about the production of goods and services. This assumption works much the same as the fixed resources assumption. At any given time, the economy has a certain level of technology. As such, it seems entirely reasonable to make this assumption. However, technology does increase over time. The analysis can then be used to see what happens when technology changes.
Technical Efficiency: The last assumption is that resources are used in a technically efficient manner. Technical efficiency means there is no waste in production, that the most physical output is obtained from the resource inputs. This can also be thought of as engineering efficiency. If, for example, 1 1/4 cups of flour, 3/4 cup of sugar, and 2 eggs are used to make two dozen cookies, and a baker uses 1 1/4 cups of flour, 3/4 cup of sugar, and 2 eggs, then two dozen cookies are produced. No waste. No mistakes. Note that technical efficiency does not mean consumers actually want the goods, only that the maximum quantity is produced.
1. Economic Efficiency – Getting the maximum output or a good from the resources used in production.
2. Equity of Fairness – Good distribution of welfare.
3. Economic Growth – Increase in output (real GDP) an expansion of production possibilities.
4. Economic Stability - Pursuing economic stability: avoiding economic and financial crisis, inflation and is a national concern.
5. Employment Growth – Positive change in the level or production of goods and services by a country over a certain period of time.
The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.
Two Goods: A simplifying assumption of production possibilities analysis is that the economy produces only two goods. In that the economy actually produces tens of thousands of different goods, this is one of these seemingly unrealistic assumptions. It is, however, a useful simplifying assumption. Limiting the analysis to two goods means that only two dimensions are needed to display graphs and curves. Two dimensions can be shown easily on paper or a computer screen. But, best of all, most conclusions reached for two goods and two dimensions apply, in principle, to tens of thousands of goods. And if necessary, more than two goods can be handled using advanced mathematics.
Fixed Resources: A second assumption is that the economy has limited and fixed quantities of resources. This is both a reasonable assumption, given the limited resources aspect of the scarcity problem, and also one that makes for useful and interesting analyses. There is no question that the economy has limited amounts of labor, capital, land, and entrepreneurship at any given time. This is the reasonable aspect of this assumption. However, these quantities of scarce resources are also bound to change, especially increase, over time. The initial assumption of fixed resources makes it possible to analyze the consequences of any changes, especially as it affects economic growth.
Fixed Technology: A third assumption is that the economy has a fixed level of technology. Technology is the information and knowledge that society has about the production of goods and services. This assumption works much the same as the fixed resources assumption. At any given time, the economy has a certain level of technology. As such, it seems entirely reasonable to make this assumption. However, technology does increase over time. The analysis can then be used to see what happens when technology changes.
Technical Efficiency: The last assumption is that resources are used in a technically efficient manner. Technical efficiency means there is no waste in production, that the most physical output is obtained from the resource inputs. This can also be thought of as engineering efficiency. If, for example, 1 1/4 cups of flour, 3/4 cup of sugar, and 2 eggs are used to make two dozen cookies, and a baker uses 1 1/4 cups of flour, 3/4 cup of sugar, and 2 eggs, then two dozen cookies are produced. No waste. No mistakes. Note that technical efficiency does not mean consumers actually want the goods, only that the maximum quantity is produced.
1. Economic Efficiency – Getting the maximum output or a good from the resources used in production.
2. Equity of Fairness – Good distribution of welfare.
3. Economic Growth – Increase in output (real GDP) an expansion of production possibilities.
4. Economic Stability - Pursuing economic stability: avoiding economic and financial crisis, inflation and is a national concern.
5. Employment Growth – Positive change in the level or production of goods and services by a country over a certain period of time.
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