Freakonomics is a collection of stories using econometric analysis to explore real-world issues. It is a fun journey through these phenomena, but it is not a grand, unified theory of economics. Rather, Levitt’s only unified point throughout the book is that, if you take the right perspective, any problem can be explained.
All of the chapters are independent of each other like a collection of short stories with an introduction, so you can read the ones you are interested in and skip others. Personally, I think the Introduction, the first chapter titled, “What do Schoolteachers and Sumo Wrestlers Have in Common?”, and chapter 4, “Where Have All the Criminals Gone?” are his most interesting.
“Where Have All the Criminals Gone?” is an exploration of why crime in the United States peaked in 1989, and steadily declined thereafter. His explanation is that abortion was made legal in the United States in 1973, and so many disadvantaged children that would have become criminals when they turned 16 were never born. His argument is convincing, and worth reading.
In conclusion, Freakonomics is not a book that will change your life, but it is a fun read. I recommend checking it out from the library and reading the chapters you find interesting, but don’t bother buying it. That stupid orange cover doesn’t look good on the shelf anyway.
Did you know that when the government subsidizes drug costs (especially through Medicaid and Medicare), it raises the price for the rest of us? This is why.
Look at a drug under patent. The company producing that drug has a monopoly for the drug, and prices the drug accordingly by setting the quantity where marginal cost equals the marginal revenue.
In the United States, however, the government has responded to political pressure about the high costs of prescription drugs by subsidizing drugs, usually by purchasing large amounts (through Medicaid) or, more recently, subsidizing insurance companies that provide prescription drugs under a Medicare program. This raises the demand for the patented (or orphaned) drug in question. The monopoly chooses to sell more of the drug at a higher price. People who are ineligible for the subsidized medicines are forced to pay a price for the drug that is higher than the price that they would pay if the government did not subsidize the drug.
Clearly, the Drug companies would welcome such purchasing subsidies, and clearly, if a person is not receiving subsidies, then the cost of the subsidy is not only the government outlays of the subsidy, but also the higher price paid by unsubsidized citizens.
