Freakonomics: Chapter 2

But soon the Klan evolved into a multi-state terrorist organization designed to frighten and kill emancipated slaves. Among its regional leaders were five former Confederate generals; its staunchest supporters were the plantation owners for whom Reconstruction posed an economic and political nightmare.

The film quoted a line from A History of the American People, written by a renowned historian: “At last there had sprung into existence a great Ku Klux Klan, a veritable empire of the South, to protect the Southern country.”

But Kennedy would go on to become a self-described “dissident at large,” writing numberless articles and several books that railed against bigotry.

But as it happened, a central tenet of life in the Klan—and of terrorism in general—is that most of the threatened violence never goes beyond the threat stage.

So what really matters is the price. Shopping around for the cheapest policy, a process that had been convoluted and time-consuming, was suddenly made simple.

Information is a beacon, a cudgel, an olive branch, a deterrent— all depending on who wields it and how.

It is common for one party to a transaction to have better information than another party.

In the parlance of economists, such a case is known as an information asymmetry.

Consider a scenario in which your loved one has just died and now the funeral director (who knows that you know next to nothing about his business and are under emotional duress to boot) steers you to the $8,000 mahogany casket.

A few months later, a pair of Enron traders named Kevin and Bob talked about how California officials wanted to make Enron refund the profits of its price gouging.

If you like granite, you might like the house; but even if you don’t, “granite” certainly doesn’t connote a fixer-upper.

“Spacious” homes, meanwhile, are often decrepit or impractical.

How might you determine whether the lack of discrimination against blacks and women represents a true absence or just a charade? The answer can be found by looking at other groups that society doesn’t protect as well.

This leaves only about 30 percent of the users with “average” looks, including a paltry 1 percent with “less than average” looks—which suggests that the typical online dater is either a fabulist, a narcissist, or simply resistant to the meaning of “average.”

(Or perhaps they are all just pragmatists: as any real-estate agent knows, the typical house isn’t “charming” or “fantastic,” but unless you say it is, no one will even bother to take a look.)