Guide Posts

Here’s a handful of seemingly simple concepts you can apply alone or in combination (be creative!) to untangle tricky issues and seek solutions.  When someone presents you with an issue or even a potential solution, check to see if these ideas are leveraged (which is good) or ignored (which usually doesn’t go so well).

• People make pretty good decisions when they have to live with the consequences: When the costs and benefits of a decision stay with the person making the decision, you generally see solid decision-making.  When you separate the costs and benefits of decisions from the decision maker, you usually see lousy decisions.  When you systematically separate decision outcomes from decision makers, you usually create a real mess.

• People respond to incentives:  You simply get more of behaviors you reward and less of behaviors you penalize.  This holds true even when you create those incentives by accident.  This concept is so powerful that quite frequently the unintended consequences of a policy far outweigh its intended consequences.

• It’s all resource allocation these days, boys:  We live in a world of unlimited desires and limited resources.  Everything available to us will always be less than everything we want.  Deciding how we should allocate scarce resources is the central topic of economics and lies at the heart of many of the issues we face.

• Don’t underestimate human potential: Ever since we figured out how to sharpen rocks, human ingenuity and effort have grown the stock of available resources many, many, many times over.  While resources are limited in the short run, they can be grown dramatically over time.

• We all possess innate, consistent flaws in our logic:  Our brains – amazing as they are – are not perfect reasoning machines.  They come from the factory with built-in biases, misleading math tendencies, and strange attractions and aversions clouding our thought process.  You can’t fully eliminate them, but you can make yourself aware of them and dramatically improve your thinking.

• Think locally, act locally: The world is incomprehensibly complex.  An average person facing a situation right in front of them is far better equipped to handle that situation than is even the smartest person alive, trying to make a one-size-fits-all decision for them from afar.

Now go forth and apply these principles! You’ll see all kinds of things you’ve never seen before.