Wednesday, November 14, 2007

Freakonomics

Freakonomics: A rogue economist explores the hidden side of everything

If you love the magic and chain reaction of economics, then you will love this book, and I love it. I love one of the ideology by the author Steven Levitt, if morality is how things supposed to behave, then economics realize how things is behaving in the actual world.

Somehow, there are a few studies by Levitt that seems rather interesting, or completely out of mind. For example, from one of his famous studies, he claimed that high abortion rates drive down the crime rates in America. When dealing with statistics, i was taught in one of the statistics classes by Dr. Paul Mullenix, to always ask this 4 questions:

1. Is the data statistically significant?
2. Is the data practically significant?
3. Is it supported by theory?
4. Is the sample size big enough?

The fact is, Levitt's study is statistically significant because the population that he picked was a representative one. The sample size is large, in fact, humongous, almost the whole United States. The only thing left out is theory. Experts say, in theory we couldn't possibly be driving down crime rates by increasing abortion rates. It just doesn't connect.

Holding on to this 4 rules, I would reject Levitt's Abortion rate vs Crime rate study because the theory does not back the data. Anyhow, it is a hell of a good read. Very interesting study and a very unusual, mind-opening way to approach the data.

I give a 7.5/10 and I recommend this book to economics and statistics lover.

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