SuperFreakonomics: Global Cooling, Patriotic Prostitutes and Why Suicide Bombers Should Buy Life Insurance

by Steven D. Levitt & Stephen J. Dubner

By now, most everyone is familiar with the term "freakonomics." Stemming from the title of the 2005 best-seller coauthored by economist Steven D. Levitt and journalist Stephen J. Dubner, freakonomics has become its own cottage industry, spawning multimedia spin-offs of the same name in a New York Times Magazine column, a popular blog and a feature-length documentary due out next year.

Promoted with the tagline "a rogue economist explores the hidden side of everything," the book was an instant hit, selling more than four million copies during its two-year reign on the New York Times best-seller list. And with chapters detailing the positive role abortion has played in reducing crime and how teachers are no-good cheaters, the book lived up to its provocative billing. The authors did not discover an altogether new way to analyze human interactions-behavioral economics has been around in some form since Adam Smith-but they did wrap the discipline in their own unique, iconoclastic sensibilities and distill its academic complexities into a captivating narrative that the masses, including myself, adored.

SuperFreakonomics revisits familiar ground. Their signature style and penchant for controversial subject matter have returned, but volume two also maintains a thread of continuity throughout that the first book never attempted. This work of "pop economics" does not have a singular focus like, say, a Malcolm Gladwell "pop-intelligentsia" book, but whereas Freakonomics' ambition stopped at impressing the reader with unexpectedly profound factoids, SuperFreakonomics seems to advocate for a wider recognition of the fact that behavioral economics can help solve some of society's biggest problems.

The book begins humbly enough in familiar "neat-o" territory with a chapter asking and answering the question "How is a prostitute like a department store Santa?" Supply-and-demand principles illustrate the devaluation of prostitute wages over the past century, and the authors blend engaging writing, astute perspectives and off-beat data to tell the tale. "Why has the prostitute's wage fallen so far?" they ask. "Because demand has fallen dramatically. Not the demand for sex. That is still robust. But prostitution, like any industry, is vulnerable to competition. Who poses the greatest competition to a prostitute? Simple: any woman who is willing to have sex with a man for free."

Levitt and Dubner's loftier ambitions come in the following chapters, in which terrorist-profiling strategies and public health practices are discussed. Their main contention to the traditional approaches used in both areas is that a lot of effort is wasted by people who, rather than looking for practical improvements, try to advance the cause by revolutionizing the way things are done. Simple, cost-effective advancements would be possible if concepts like data mining and hand-washing were simply embraced and better incentivized, they argue. Ultimately, doctors are lazy and self-centered-just like the rest of us who didn't go to college for eight years-so hospitals should recognize that human nature will interfere with any hand-washing protocol that relies on docs simply "doing the right thing" for the sake of altruism, even if that altruism is based on something as simple as spending two minutes of their time doing something that has been statistically proven to save lives.

This line of thought continues into the final chapter on climate change. Though it is sure to be highly divisive, the authors use a refreshingly apolitical tone to honestly address the remaining uncertainties surrounding climate science while also suggesting that there are some practical approaches that could help avert the possibility of a global warming-induced catastrophic future through the use of geoengineering, a term that categorizes any method used to deliberately manipulate the Earth's climate.

One relatively inexpensive strategy counterintuitively suggests emitting vast quantities of pollution into the stratosphere. Based upon recorded evidence that "global cooling" occurs in the years after large volcanic eruptions spurt sulfur dioxide high into the atmosphere, some scientists believe that using a "hose to the heavens" to willfully pump sulfur into the sky will help counteract the warming caused by greenhouse gases. For conservationists like Al Gore, geoengineering solutions in this vein are tantamount to environmental blasphemy. "In a word," says Gore in the book, "I think it's nuts." Rather than endorse the concept, per se, SuperFreakonomics merely uses the detached outlook of an economist to advocate for considering any solutions that are cheap, practical and easy to implement before those that are expensive, complicated and require people to act against their natural desire to put their own self interests above all else. 

"If you think like a cold-blooded economist instead of a warm-hearted humanist, Gore's reasoning doesn't track," the authors state. "It's not that we don't know how to stop polluting the atmosphere. We don't want to stop, or we aren't willing to pay the price."

It is hard to argue with many of the solutions that come out of that line of reasoning. When evidence shows that hospitals that incentivize hand-washing among their staffs get better results-and thus save more lives-it is easy to embrace the concept of removing personal responsibility and self-sacrifice from the equation. Similarly, a low-cost solution like adding fluoride into the public water system clearly works better than trying to convince teenagers that they really ought to floss twice a day. 

But when that mode of thinking concludes that society should attempt to offset the problems created by the pollution of the past with more pollution because it may allow us to more easily continue escalating our consumption levels, it makes me skeptical that answers to society's largest global problems are rooted in behavioral economics-even when it is presented in a wonderfully written, thought-provoking and entertaining book.

Jared Wade is editor of Risk Management.

Think Twice: Harnessing the Power of Counter-intuition

by Michael J. Mauboussin

In 2007, Malcolm Gladwell's best-selling book Blink made a compelling case for the virtues of split-second decision making. Two years later, Michael Mauboussin, chief investment strategist at Legg Mason Capital Management and a finance professor at Columbia Business School, takes the opposite view in Think Twice, suggesting that our instincts are often wrong.

Through fascinating real-life examples including horse racing, wine sales, Netflix movie recommendations and bridge construction, Mauboussin shows how common mental mistakes lead us to poor decisions even when we think we're applying reason and logic to a situation. For instance, our inability to take the experiences of others into account when making a decision creates a false sense of optimism and explains why corporations are so willing to initiate mergers and acquisitions despite their poor record of success. Or how our tendency to oversimplify complex systems makes us underestimate the consequences of individual actions on the larger system, leading to situations like the financial crisis, in which the behavior of individual institutions had major repercussions on the economy as a whole. It even explains how a misunderstanding of luck and skill encourages investors to chase the so-called "hot" stock only to end up buying high and selling low.

Through these examples, and many others, Mauboussin skillfully shows how these subconscious errors in judgment impact our personal and professional lives every day. By helping readers recognize where their thinking might go astray, Think Twice forces them look at life differently, regardless of what their intuition might say.

Morgan O'Rourke is editor in chief of Risk Management.

Healing the Wounds: Overcoming the Trauma of Layoffs and Revitalizing Downsized Organizations

by David M. Noer

By the early 1990s, the corporate world was learning the hard way that the long-standing expectation of working for the same company for 40 years until retirement then coasting into a nice, fat pension was a thing of the past. As millions of workers were fired during various waves of layoffs, they entered unfamiliar professional and psychological territory that gave rise to feelings of betrayal, resentment, insecurity and depression. 

But unexpectedly, these feelings were also felt by those who retained their positions as well as the managers conducting the layoffs-a phenomenon that degraded performance across the board. David M. Noer, a professor of business administration and leadership at Elon University in North Carolina and a leadership consultant, calls this "layoff survivor sickness." His recent book Healing the Wounds is his manual on how to spot it, treat it and prevent it. 

The book was initially published in 1993 and has recently been rewritten and re-released. But unlike many other business books re-released to take advantage of current conditions in the business world, Healing the Wounds actually feels relevant and helpful. Some of its advice might seem trite or touchy-feely, but this is a work that genuinely looks at the mental stress of laying people off, the costs that come with it and the hard work that needs to be accomplished by everyone in the organization in order to recover from it as a group. It has been a rough year for all of us-particularly those individuals who have been fired amidst the economic downturn-so there are surely many professionals who could benefit from a book like this.

Bill Coffin is publisher of Risk Management.