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Thursday, July 20, 2006


A Rogue Economist Explores the Hidden Side of Everything
Steven D. Levitt &
Stephen J. Dubner
(Try their blog at

It was an interesting read – it is not at all an economics book, in a traditional sense.

Here are a few pointers from the introduction:-

“Morality, it could be argued, represents the way that people would like the world to work – whereas economics represents how it actually does work…..This book, then, has been written from a very specific worldview, based on a few fundamental ideas:

Incentives are the cornerstone of modern life…
The conventional wisdom is often wrong…
Dramatic effects have often distant, even subtle, causes…
“Experts” – from criminologists to real-estate agents-use their informational advantage to serve their own agenda….
Knowing what to measure and how to measure it makes a complicated world much less so.”

“Economics is, at root, the study of incentives: how people get what they want, or need, especially when other people want or need the same thing. Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty – it may involve coercion or exorbitant penalties or the violation of civil liberties – but the original problem, rest assured, will be fixed. An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation.”

“The basic reality is that risks that scare people and the risks that kill people are very different…… Risk = Hazard + Outrage…When hazard is high and outrage is low, people underreact, And when hazard is low and outrage is high, they overreact” – quoting Peter Sandman, a risk communication consultant from Princeton, NJ.

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