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….. simply a means of urging people to do more of a good thing or less of a bad thing.
Economics ultimately boils down to the study of incentives. Incentives are all around us, whether natural or manufactured (like by a parent, teacher, boss, politician or economist).
Three kinds of incentives:
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A day-care center wanted parents to pick up their kids on time, so they levied a $3 fine for parents who were late. However, the number of late pickups actually doubled.. That’s because the fine was too affordable, sent the wrong signal that being late wasn’t a big deal and removed the parents’ guilt of being late. Without a moral incentive, parents continued to be late even when the $3 penalty was removed.
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If we feel in control, we view things as safer. We prefer to drive a car than fly, even though there are far more deaths from car crashes than from plane crashes. When we’re in the driver’s seat we feel in control, but in a plan we relinquish all control to the pilot, so it feels riskier.
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We weight the things that could kill us now more heavily than the things that could kill us in the future. A terrorist can kill us right now, but eating too much McDonald’s won’t kill us for a few decades.
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We see the news stories of the horrific plane crashing into the side of a mountain or the kid playing with a gun that accidentally goes off, so these feel more likely compared to the guy who fell asleep in a car and quietly veers off the road or the child who drowns in the pool without any news coverage.
A simple equation might be: Risk = Hazard + Outrage
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"A good idea should be like a girl's skirt; long enough to cover the subject and short enough to create interest."
Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? Freakonomics will literally redefine the way we view the modern world.
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