• Freakonomics is a non-fiction book written by authors Steven D. Levitt and Stephen J. Dubner, which explores the hidden side of almost everything.
• The book uses clever analysis and insightful anecdotes to examine a variety of topics including drugs, crime, parenting, education and global economies.
• It encourages readers to think differently, challenge conventional ways of thinking, and search for the incentives that drive people and organizations.
• As a UX designer, Freakonomics offers a valuable insight into the human motivations that drive the development of user experience, and the implications when such behaviors go awry.
• Similar books that may be of interest to a UX designer include Thinking Fast and Slow by Daniel Kahneman, Outliers by Malcolm Gladwell, and Nudge by Richard Thaler and Cass Sunstein.
✏️ Highlights
Incentives can affect your wallet, your pride or your conscience.
Incentives fall into three general categories: economic, social and moral.
People regularly have opportunities to cheat, steal and defraud, so it’s interesting to examine what incentives
People regularly have opportunities to cheat, steal and defraud, so it’s interesting to examine what incentives keep them from doing so.
there is a strong social incentive, as people do not want to be seen by others as doing something wrong. Often, depending on the crime, this can be a stronger incentive than economic penalties.
In a study of day care centers in Haifa, Israel, economists tried to reduce the number of parents arriving late to pick up their children.
In a study of day care centers in Haifa, Israel, economists tried to reduce the number of parents arriving late to pick up their children. To accomplish this, they introduced the economic disincentive of a small $3 fine.
rather than reduce the number of late pick-ups, the change actually doubled them.
One problem may have been that the amount was not big enough, signaling to the parents that late pick-ups were not a significant problem. The main issue, however, was that
One problem may have been that the amount was not big enough, signaling to the parents that late pick-ups were not a significant problem.
Parents could now effectively buy off their guilt for a few dollars,
Parents could now effectively buy off their guilt for a few dollars, so they were less worried about being late.
once the signal had been sent, the effect could not be undone. The removal of the fines had no remedial effect on the number of late pick-ups.
When introducing incentives, think carefully about whether
When introducing incentives, think carefully about whether they might displace existing ones.
Have you ever robbed a bank? Probably not, since there are a variety of disincentives (e.g., prison, loss of social stature, a guilty conscience) that keep you from trying. And yet, some people do rob banks even though they face the same disincentives. Why?
different people react differently to the same incentives.
Each customer had the same incentives to pay – the desire to be and look honest – so the variations in payment rates each day and at the different locations revealed some interesting trends about honesty in changing conditions.
Incentives are context dependent: what works when it’s sunny might not when it’s raining.
The key contributing factor in how honest his customers were seemed to have been personal mood, which was in turn affected by other factors:
higher payment rates on unseasonably warm days and lower rates on unseasonably cold days.
people in happy offices being more likely to pay.
increase in payment rates following 9/11, which the author attributes to a general surge in empathy.
beware; when an estate agent encourages you to take the first decent offer on your house, it is not to maximize your profit but their own.
The funeral director, knowing you know little about his business, can use your anxieties about giving your loved one a proper burial to steer you to a more expensive
The funeral director, knowing you know little about his business, can use your anxieties about giving your loved one a proper burial to steer you to a more expensive casket than you would have otherwise chosen.
try to have strategies in place that will buy you valuable time and space to consider your choices in peace, such as saying you need to get a second opinion
The Internet has greatly helped reduce the informational advantage of experts.
websites enabled customers to compare insurance prices offered by dozens of different companies in mere seconds.
culture of information asymmetry
information asymmetry. The buyer cannot know the true reasons why the seller is selling their new car, so they logically assume that there is something wrong with it.
the amount of interest they generate is to omit their photo.
people’s disproportionate fear of flying compared to driving: we feel in control when we’re actually holding the steering wheel of a car, whereas we feel helpless on a plane. But the risk of death in either form of transport is in fact about the same.
Incentives can affect your wallet, your pride or your conscience.
Incentives fall into three general categories: economic, social and moral.
People regularly have opportunities to cheat, steal and defraud, so it’s interesting to examine what incentives
People regularly have opportunities to cheat, steal and defraud, so it’s interesting to examine what incentives keep them from doing so.
there is a strong social incentive, as people do not want to be seen by others as doing something wrong. Often, depending on the crime, this can be a stronger incentive than economic penalties.
In a study of day care centers in Haifa, Israel, economists tried to reduce the number of parents arriving late to pick up their children.
In a study of day care centers in Haifa, Israel, economists tried to reduce the number of parents arriving late to pick up their children. To accomplish this, they introduced the economic disincentive of a small $3 fine.
rather than reduce the number of late pick-ups, the change actually doubled them.
One problem may have been that the amount was not big enough, signaling to the parents that late pick-ups were not a significant problem. The main issue, however, was that
One problem may have been that the amount was not big enough, signaling to the parents that late pick-ups were not a significant problem.
Parents could now effectively buy off their guilt for a few dollars,
Parents could now effectively buy off their guilt for a few dollars, so they were less worried about being late.
once the signal had been sent, the effect could not be undone. The removal of the fines had no remedial effect on the number of late pick-ups.
When introducing incentives, think carefully about whether
When introducing incentives, think carefully about whether they might displace existing ones.
Have you ever robbed a bank? Probably not, since there are a variety of disincentives (e.g., prison, loss of social stature, a guilty conscience) that keep you from trying. And yet, some people do rob banks even though they face the same disincentives. Why?
different people react differently to the same incentives.
Each customer had the same incentives to pay – the desire to be and look honest – so the variations in payment rates each day and at the different locations revealed some interesting trends about honesty in changing conditions.
Incentives are context dependent: what works when it’s sunny might not when it’s raining.
The key contributing factor in how honest his customers were seemed to have been personal mood, which was in turn affected by other factors:
higher payment rates on unseasonably warm days and lower rates on unseasonably cold days.
people in happy offices being more likely to pay.
increase in payment rates following 9/11, which the author attributes to a general surge in empathy.
beware; when an estate agent encourages you to take the first decent offer on your house, it is not to maximize your profit but their own.
The funeral director, knowing you know little about his business, can use your anxieties about giving your loved one a proper burial to steer you to a more expensive
The funeral director, knowing you know little about his business, can use your anxieties about giving your loved one a proper burial to steer you to a more expensive casket than you would have otherwise chosen.
try to have strategies in place that will buy you valuable time and space to consider your choices in peace, such as saying you need to get a second opinion
The Internet has greatly helped reduce the informational advantage of experts.
websites enabled customers to compare insurance prices offered by dozens of different companies in mere seconds.
culture of information asymmetry
information asymmetry. The buyer cannot know the true reasons why the seller is selling their new car, so they logically assume that there is something wrong with it.
the amount of interest they generate is to omit their photo.
people’s disproportionate fear of flying compared to driving: we feel in control when we’re actually holding the steering wheel of a car, whereas we feel helpless on a plane. But the risk of death in either form of transport is in fact about the same.
