What Do Schoolteachers and Sumo Wrestlers Have in Common?

Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?

This chapter's main idea is that the study of economics is the study of incentives. We find a differentiation between economic incentives, social incentives and moral incentives. Incentives are described in a funny way as "means of urging people to do more of a good thing or less of a bad thing", and in this chapter we find some examples -public school teachers in Chicago, sumo wrestling in Japan, take care center in Israel and Paul Feldman's bagel business - of how incentives drive people and most of the time the conventional wisdom turns to be "wrong" when incentives are in place.

I definitely agree with this, while reading this I could think of several examples that take place in Mexico's daily life, and this is a clever explanation for them: Policemen corruption. It is not that policemen are bad people or that they don't have morals, it is that the monetary incentive is strong enough so that they prefer to "cheat" and profit more from corruption than what they would earn by their monthly wage.

Within this discussion it is explained that incentives sometimes lead to cheating, because "something worth having is something worth cheating for". I think the incentives placed in daily life -those that we can control, let's say, in our business - should be established wisely, in order for them to have the desired effect, instead of fostering cheating among the business (like theft by employees and such). As we can see this happens to the government which such policies as the ones illustrated in the public school in Chicago ones.

From this chapter I mainly learnt that incentives are "the cornerstone of modern life" - they drive our actions more than we notice, even unconsciously, they are there, and it would be useful if we are aware of this, in order to predict others behavior and probably would be useful too in negotiation.

Chapter 2: How is the Ku Klux Klan like a Group of Real-Estate Agents?

This chapter is very important from my point of view, since it talks about the importance of information in all ways of life and particularly how information means power. The asymmetries of information are a widespread problem even nowadays and we find it the most in the low class society obviously because of the lack of education.

While reading about asymmetric information I thought of lawyers in Mexico, when they use the misinformation about laws as an advantage to abuse people and get more money from them. I can think of really lots of examples about this and each of them illustrate the importance of information, not only to have power, but to prevent ourselves to be tricked or abused by knowledgeable people.

It's also interesting to know that the Internet has make it possible for a lot of people to get information of all kinds, since the information is now in had of everyone within some seconds. This obviously let people be more informed, especially about products and services along the world, which wasn't possible before.

Another good example of my real life about this is the kind of new Transparency Law which was implemented by president Vicente Fox in Mexico, where we are supposed to be able to access any information about the rules or transactions (as well as monetary issues) occurring within the government and public institutions. The access to information by every citizen reduces the ability of the public workers to cheat and abuse people, therefore it creates a more fair government. Also this has been enhanced by the usage of the Internet, since it provides websites with loads of information about these matters, this way reaching more people than it would if it was only written information in books or newspapers. This example from my perspective is pretty much integrative of what this chapter says about information and its power.

Regarding negotiations, I think this is a key topic, as we have studied in this curse, information give us the power to make better arguments and have better anchors in hand for bargaining. The asymmetries of information totally apply for negotiations issues as well, that's why we shouldn't negotiate when we have not enough information for it!

Chapter 3: Why Do Drug Dealers Still Live with Their Moms?

On Chapter 3 we can find an interesting economic overview of some well-known American crack gang, even included their financial records - which lead to interesting findings of how the "enterprise" works. I mainly founded it interesting how an illegal drug dealing organization could operate such as a "common firm" to the point to even have their financial statements and such careful work.

The earning structure of the drugs company is interesting since it seems to be a really thin/tall pyramid. The low wages for drug dealers are surprising too, since I always really thought that drugs dealers earned a lot of money, but as the author states - conventional wisdom is sometimes untrue. I can link this with the first chapter: probably these drug dealers have not enough economic incentives to do such a risky and bad paid work but they might have great rewards in the future, which keeps them on this kind of "job".

The analysis of the economic activity of the crack gang is kind of weird, but I guess every organization - even though it is not a conventional enterprise - relies on economic theory and works under financial schemes that we all know.

This chapter mainly teaches us that really "conventional wisdom" is often wrong and by doing some research and looking forward find new data we can find out that what we thought is not always true.

Chapter 4: Where Have All the Criminals Gone?

Chapter 4 is the most astonishing for me. Starting for the title, the main theory that is presented here - about the legalization of abortions on the 70s and the outcome of drop in crime during the 90s - is totally breaking-trough