Sunday, June 12, 2011

Book Review (#13 of 2011)

Discover Your Inner Economist: Use Incenctives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist by Tyler Cowen.
This is one of the few non-ebooks that I have left, which is sad because I would have liked to have had notes and highlights from this book saved in the Cloud for all posterity.

Here is a recent profile on Tyler Cowen in BusinessWeek, which tells you what you need to know about him and this book. Cowen has what my family calls a "mature palate." He has been to over 70 countries and has sampled more food, books, art, and ideas than just about anyone alive. A "cultural billionaire," as he says. (I reviewed his most recent The Great Stagnation here). I jive with Cowen probably because I agree with him about food, so I use his views to confirm my own--which he writes about. (In a restaurant, always order the strangest thing on the menu as it's probably going to be the best-prepared item. And only cook/eat at home what you can't find by eating out-- also good advice). I admire his ability to read and discard books for up to 8 hours at a time, while writing his own books, blogging, traveling, teaching, and advising PhD students. Scott Sumner once asked, "How many Tyler Cowens are there?" as he must have cloned himself somehow.

This book should probably be titled "Ignore your Inner Economist," because Cowen is often talking to people like myself-- urging us to resist what we know to be irrational and think of a greater good. Chapter 5, on signaling, seemed to be written directly to me (Pg 92):
If you are the economically informed member of your family, or perhapes even an economist, don't flaunt it. Hide its universal nature or widespread applicability. Do not present economic wisdom as a matter of principle or as a general way of thinking about life. To look good at home, make all economic points in purely specific contexts. Don't prattle on about incentives or signaling as all-powerful means for understanding the entire world.
He goes on to talk about how I should ignore the $4 billion in deadweight loss to society each Christmas from gift-giving, and just do it because it makes others happy and that's what matters. (And this can sometimes be modeled. Ex: If my receiving a gift causes various family members' utility to increase by 10 and mine to decrease by 2, then it's a net positive 8). This book is the antithesis of pop economics books.

I liked his chapter on the Seven Deadly Sins. Many people engage in acts that may increase overall utility but be harmful for society in the long-run. Some people engage in arbitrage that doesn't make the market any more efficient-- people finding items on eBay that are low-priced because the seller spelled the name of the item wrong, for example.

On the behavioral side, we all engage in the "dangerous and necessary art of self-deception." Pg. 115:
"Many of us think... we are the best judges of political and religious truth in the entire world. If we knew some better judge of truth, we would accept that person's opinions all the time...Even the deferential think they are 'the best spotters of people to whom we should defer' in the world."
I tend to fall into that last sentence. My last post linked to some scientific studies of self-deceptive behavior, how when some people are confronted with information contrary that seems to disprove what they believe, they simply reinforce their beliefs rather than change them. Reagan Mythology is similar to how many Muslims who refuse to believe Bin Laden was behind 9/11.

Most useful is probably the last chapter, which is on charitable giving. Give to people who need money but aren't begging for it rather than the beggar on the corner. Become a loyal giver to a few charities and get your name off their "share" list and their costly mailing lists. Explore creative means like microcredit, where wealth can be created.

I give this book 4 stars out of 5. Cowen is more verbose than he is on his blog or his Kindle Single. But the book definitely got better as I went, which he probably intended.

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