This article is about four books, and how they upend traditional wisdom and change the way we think.
l by Dr. Ruwantissa Abeyratne
(November 10 , Montreal, Sri Lanka Guardian) Super Freakonomics (Harper Collins:2009), a book written by Steven D. Levitt and Stephen J. Dubner as a sequel to their earlier book Freakanomics (2005) once again looks at statistics and data in a manner that a conservative mind might not look at and brings to bear statistical anomalies that might get the reader to think from an entirely different perspective. Super Freakonomics shows us the hidden side of things and turns conservative perceptions on their heads.
For instance the book reveals the fact that there is a significant risk of injury or death posed to a drunken walker than a drunken driver. The authors go on to say that each year in the United States, more than 1000 drunk pedestrians die in traffic accidents. Such accidents result from drunks falling off pavements onto busy streets that have heavy vehicular traffic or from their rashly dashing across highways. They conclude that on a per mile basis a drunken pedestrian is eight times more likely to be killed than a drunk driver.
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| When we move towards a future world that offers increasing challenges, we have to sometimes question conventional knowledge and wisdom and think out of the box. We have also to expect that compelling challenges will be eradicated by technological progress in ways we do not expect. |
Both books justify their results through numerical analysis. This gives rise to an inextricable link between fundamental disciplines such as law, politics and economics, wrought through questions that are not the usual ones that come to mind. For example, in Freakonomics, the authors ask the question as to why crime rates plunged during the past years, and what is more dangerous – a gun or a swimming pool?
The main theme of the book is that the modern world, despite a surfeit of obfuscation, complication and downright deceit, can still be fathomed and the acts of our fellow beings can be attributed to a pattern of devious human behaviour. The trick is, to use the words of the authors, “to see through all the clutter”. Thus, Freakonomics links the two elements of morality and economics by stating that if morality represents how we would like to work, then economics represents how it actually works.
As to why crime rates plunged in the United States in the nineties, one of the fascinating discussions revolve round the 1973 decision of the Supreme Court in Roe v. Wade. The Court, in deciding on a young mother’s right to abort her foetus, which was illegal in many States in the United States at that time, considered the detriment that the State would impose upon a pregnant woman by denying her the choice to abort. The result, in the mind of the Supreme Court, was bound to be a distressful life with an infant uncared for, who would grow up in destitution and deprivation. The Court was also mindful of the fact that the mental and physical health of the mother would suffer. The Court recognized the fundamental fact of anthropoid nature – that when a mother does not want a child, she usually has good reason. Therefore, the court gave a pro-choice decision, and accorded to mothers the right to abort their foetus provided they did so under medical and psychiatric care.
The authors record that in the first year after the Roe v. Wade decision, some 750,000 women had had abortions in the United States (representing one abortion for every 4 live births). By 1980 the number of abortions had reached 1.6 million (one for every 2.25 live births). The woman who was most likely to have taken advantage of the Roe v. Wade decision was, according to the authors of Freakonomics, a typically unmarried poor person, and her future child might have been 50 percent likely to have been brought up in poverty with no proper education. He would have been 60 percent more likely than the average child who had only one parent to care for him. All these factors would go to bring about a child who could easily be persuaded to take to crime. It is therefore reflected as an inexorable conclusion that, with the absence of such children, who would have turned out to be criminals, the crime rate would go down in the 1990s which would be the time the children born at the time the Roe v. Wade decision was handed down would have been teenagers.
As to the more dangerous of the two – the gun or the swimming pool, one might jump to the conclusion that the gun would be a much more dangerous thing, given that a gun in the hand of a child would be more lethal than an inviting pool. Think again. Statistics in the United States show that more kids die of drowning rather than from gunshot wounds.
Economics is about incentives and that people get what they want. If the incentive is substantial and worthwhile, it will be acted upon. Take for instance the example cited in the book of the real; estate agent. The following analysis is made: on the sale of a house for $ 300,000, an estate agent in North America would receive 1.5 percent of the sale price, which would be $ 4,500. If the agent were to sell the house at 310,000, the seller would get $10,000 minus commission which would be $ 9,400. However, the agent would receive only $ 150 additionally. So, according to Freakonomics, the agent would not work harder to get the seller a better price if the seller were to get $ 9400 and the agent gets only $ 150.
All this goes to show that that there is no unifying theme to Freakonomics. It is merely a process of thought that helps us understand how the real world works. If ever there were a unifying theme it would be that there may not always be what is called “conventional wisdom” or “common sense” and that we might just react by putting a stronger fence round our swimming pool or coerce the real estate agent to work harder.
An overarching concept that most refer to loosely, and attribute change to, is globalization. The strongest thrust of globalization in the business world is its ability to generate competition within and between nations to offer the best goods and services at the lowest prices. The quality of services and pricing in China as an off-shore base have encouraged other nations, such as Malaysia, Thailand, Ireland, Vietnam, Brazil and Mexico to vigorously compete as viable off-shore bases.The World Is Flat: A Brief History of the Twenty-first Century (Farrar, Straus and Giroux: New York, 2006) is a best-selling book which analyzes the progress of globalization with a focus on the early twenty first century. The author, Thomas L. Friedman uses the metaphor of a flat world suggesting that the competitive playing fields between industrial and emerging market countries are leveling.
However, in a later research work World 3.0 (Harvard Business Review Press:2011) written by Pankaj Ghemawat, a former Harvard University academic, the myth of the flat world is to a large extent debunked. With statistics and figures, Ghemewat shows that the widely-proclaimed homogenizing impact of globalization is not happening. For instance, in the field of information flows, contrary to the “globalization” mindset, an estimated 17 to 18 percent of all internet traffic was routed across one national border between 2006-2008. Also, although cheap rates of labour led many firms to offshore IT services to India and other regions, this accounted only for 20 per cent of the market. Only 20 per cent of readership of Time magazine is outside the United States. Only 21 per cent of news coverage in the United States addresses events and information of other countries.
Ghemewat points out that first generation immigrants amount only to only 3 per cent of the World’s population. Students studying outside their home countries in universities amount only to 2 percent and that it is estimated that about 90 percent of the people of the world will never leave the country in which they were born.
These four books give us the impetus to question our own disciplines. For example, in my own, which is air transport, the air transport industry is full of paradoxes. On the one hand, air transport contributes 10% of the world GDP (the gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country's overall economic output) and employs approximately 80 million people worldwide. Yet, over the decade 1999-2009 the industry lost $56 billion. Given that over that period there were 20 billion passengers carried by air, the industry lost $2.8 per passenger on average. The paradox is that despite this long history of loss, Airbus Industrie forecasts that between 2009 and 2028 there will be a demand for 24,951 passenger and freighter aircraft worth USD 3.1 trillion, and that, by 2028 there will be 32,000 aircraft in service compared with 15,750 in 2009. Another paradox is the open skies concept. On the one hand, progressive thinking favours liberalization of air transport through open skies, which means that air transport must be treated like any other business and should not have market access barriers. On the other hand, airport capacity is finite and a massive injection of capacity will be a severe drain on the process of slot-allocation.
When we move towards a future world that offers increasing challenges, we have to sometimes question conventional knowledge and wisdom and think out of the box. We have also to expect that compelling challenges will be eradicated by technological progress in ways we do not expect. The book Super Freakonomics subsumes this inevitable fact by discussing how the problem of horse manure execrated by 150,000 horses used to draw carriages across the city, which was collecting in abundance throughout New York city causing health hazards and unbearable smell, was unexpectedly eradicated and solved with the advent of the motor car.
A fitting finale to this discussion is one by Thomas J. Watson, Chairman of the Board of IBM in 1943 when he said: “I think there is a world market for maybe five computers.” . Wonder what Steve Jobs would have said to that!!
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