The one-sentence summary
Anyone can turn economic reasoning to their own advantage.
- Anyone can turn economic reasoning to their advantage – at home, work or on holiday
- Understanding the incentives that work best with each individual is the key to satisfactory and successful daily interactions, but it only works if we understand the importance of respect for human liberty
- Discovering your inner economist can lead to a happier, more satisfying life
- Good economics should adhere to three tests: The Postcard Test (write it on the back of one); The Grandma Test (the theory must be intelligible); and The Aha Principle (the thought should be a revelation)
- To see patterns in human behaviour, we need to expand our repertoire of recognition chunks (chess grandmasters can keep 50,000 in their cognitive capacity)
- Psychologists highlight Fundamental Attribution Error or correspondence bias: assuming that a single incidence of consumer behaviour represents a deep rooted personality trait
- We make bad decisions when we are under stress
- In reality we are more typical than we think we are
WHAT’S GOOD ABOUT IT
- He offers three parables:
1. Dirty Dishes (money doesn’t always work: your kids will still not do the washing up if you offer to pay)
2. Car Salesman (if you don’t pay people, they won’t do anything)
3. Parking Tickets (diplomats from countries with high domestic corruption run up the most parking tickets in New York: people respond to the same incentive in different ways)
- Understanding our approach to culture works best when using two principles of self-management incentives:
1. What is scarce? Time, attention or money?
2. We don’t care about culture as much as we would care to admit
- A tragedy of the commons occurs when individual actions, when taken together, destroy the value of an asset or resource (Is the Mona Lisa over exposed?) In the Me Factor, you don’t have to pay as much attention to the art as the artist wants you to
- A third of Londoners buy books “solely to look intelligent”
- Selective forgetfulness is the key to many a successful marriage
- The illusion of group productivity applies to many a group brainstorm
WHAT YOU HAVE TO WATCH
- It is fairly long and detailed so you have to dig hard for the nuggets.