Monday, 16 June 2014

Think Like A Freak: Two Things Worth Sharing

I've been reading Steven D Levitt and Stephen J Dubner's latest book Think Like A Freak - the third offering in the 'freak' trilogy, after the bestselling Freakonomics and its sequel Superfreakonomics. Unlike the first two books, which contained plenty of interesting conclusions from original and daring research, this third offering isn't up to as much, in my opinion. The indication is that they've taken this thematic about as far as they can, and have instead resorted to derivative material, and propensities for stating the obvious.

They appear to believe they are teaching the reader how to "think outside the box", but in reality I suspect the kind of people who'd be attracted to a book like this would be the kind of people who already know how to think outside the box . That said, there are a couple of interesting sections that I think are worth sharing.

1) Nigerian e-mail scams.
You know those emails that tell you a huge sum of money needs to be transferred out of Nigeria (it's pretty much always Nigeria) and that you will get a few million quid if you hand over your bank details. Virtually nobody falls for this, and the fact that it's always Nigeria should compound the alarm bells even more. Why, then, do scammers carry on using Nigeria, when it is so well known that the word 'Nigeria' in a bank transaction email request signals to almost everyone that it is a con? I had predicted the answer before Levitt and Dubner shared it later in the chapter, but it's a quite interesting example of thinking like an economist.

Here's the rationale. Scammers still insist on specifying Nigeria, because sending out millions of emails is pretty much costless, so having the majority of people ignore them doesn't really matter. What would cost the scammers, though, is spending time and money setting up a phony exchange with people who realise halfway through that they are being conned and pull out.

By choosing Nigeria, the scammers are basically saying this: if you're one of the few gullible people left in the world who hasn't been apprised of the Nigeria scam and are likely to fall for it, you will be of those for whom the uniformity of the 'Nigeria' email won't be alarming and prohibitive. With the simplicity of using Nigeria each time, the scammers save having to waste time with all the false positives, and they will continue to catch in their net the few gullible fish still in the sea.

2) Behind the scenes with David Cameron
In this chapter the authors recount an ill-fated interaction they had with David Cameron shortly before he was elected Prime Minister. They explained to Cameron that when you don’t charge people directly for things like health care, they will consume too much of it, which inevitably skews the incentives of both the providers and the consumers (a point I've made in a previous blog).

Levitt and Dubner conveyed the following illustration to David Cameron to highlight the absurdity of free health care with no disincentives:

"What if every Briton were also entitled to a free, unlimited supply of transportation? That is, what if everyone were allowed to go down to the car dealership whenever they wanted and pick out any new model free of charge, and drive it home?"

At this point, the authors tell us, Cameron, who had been all ears up until then, became less enamoured with them. "The smile did not leave David Cameron's face, but it did leave his eyes.” they tell us. Levitt and Dubner took that as evidence that even intelligent would-be Prime Ministers will ignore evidence or good argument if there is the slightest hint that they’ll be unpopular.

It’s certainly true that this does happen frequently in politics, and perhaps this was one of those times (although bear in mind Cameron wasn’t Prime Minister at the time so wouldn’t have been in a position to do much anyway). But it’s equally likely that Mr Cameron responded incredulously because their illustration was a poor one.

Unlike the food analogy I gave in the 2013 blog post to which I linked above, the ‘buying a car’ analogy doesn’t work at all, because the analogy to over-consumption and bodily neglect isn’t there in car buying. People don’t choose what kind of operation they want in the way that they choose the kind of car they want. Skewing the incentives in the NHS and not making people incentivised is a problem, but the NHS problems are not a comparable analogy to nationalised car purchases.

Whether Cameron changed his tone because the analogy was poor, or whether he changed his tone because he knows he’s as guilty as the rest of politicians when it comes to ignoring evidence or good argument if there is the slightest hint that they’ll be unpopular, only he knows.

Anyway, if you like the sound of the above, you could do worse than giving Levitt and Dubner's latest book a look. Maybe (hopefully) one day they’ll be putting Amazon links to my books on their Blog. I promise to try very hard not to resort to derivative material and propensities for stating the obvious. J

* Photo courtesy of Freakonomics blog